Is There Now An Opportunity In DaVita Inc. (NYSE:DVA)?

Today we're going to take a look at the well-established DaVita Inc. (NYSE:DVA). The company's stock saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. The recent jump in the share price has meant that the company is trading around its 52-week high. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine DaVita’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for DaVita

Is DaVita Still Cheap?

DaVita appears to be overvalued by 21% at the moment, based on our discounted cash flow valuation. The stock is currently priced at US$142 on the market compared to our intrinsic value of $117.07. Not the best news for investors looking to buy! Another thing to keep in mind is that DaVita’s share price is quite stable relative to the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

What kind of growth will DaVita generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a relatively muted profit growth of 2.1% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for DaVita, at least in the short term.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in DVA’s future outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe DVA should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on DVA for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into DaVita, you'd also look into what risks it is currently facing. To help with this, we've discovered 2 warning signs (1 doesn't sit too well with us!) that you ought to be aware of before buying any shares in DaVita.

If you are no longer interested in DaVita, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com