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Today we're going to take a look at the well-established DaVita Inc. (NYSE:DVA). The company's stock received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$177 at one point, and dropping to the lows of US$134. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether DaVita's current trading price of US$141 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at DaVita’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What Is DaVita Worth?
Good news, investors! DaVita is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. we find that DaVita’s ratio of 12x is below its peer average of 24.07x, which indicates the stock is trading at a lower price compared to the Healthcare industry. Although, there may be another chance to buy again in the future. This is because DaVita’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
See our latest analysis for DaVita
Can we expect growth from DaVita?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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 negative profit growth of -9.9% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for DaVita. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Although DVA is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to DVA, or whether diversifying into another stock may be a better move for your total risk and return.