DaVita (DVA) Could Be 11% Undervalued Ahead Of Its August 4 Earnings Report

Investor focus on DaVita (DVA) has intensified ahead of the August 4 earnings report, as recent solid quarterly results and upbeat estimate revisions clash with concerns about slower sales volumes and modest projected growth.

See our latest analysis for DaVita.

DaVita's recent share price return has been strong, with a 57.55% 3 month gain and 109.12% year to date, while the 1 year total shareholder return of 64.04% points to momentum that has been building rather than fading.

If strong recent momentum in DaVita has you looking for other potential opportunities in healthcare, it could be worth scanning 40 healthcare AI stocks.

DaVita now trades above the average analyst target and above some estimates of intrinsic value, despite questions around slowing volumes and modest growth. Is the market too relaxed about risk, or is it fairly pricing the story?

Most Popular Narrative: 11.3% Undervalued

The most followed DaVita narrative pegs fair value at $270, above the last close at $239.46. That story leans heavily on technology and data driven kidney care.

Ongoing technology and AI investments in clinical platforms, scheduling, call centers and revenue operations are expected to lower administrative friction, support higher collections and structurally expand operating margins and free cash flow.

Read the complete narrative.

Want to see what sits behind that earnings upgrade story? The narrative focuses on steady revenue compounding, firmer margins and a future earnings multiple that is not excessive by healthcare standards.

Result: Fair Value of $270 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, DaVita’s bullish narrative still faces real pressure from potential shifts in payer mix and higher long term care costs, which could squeeze margins and free cash flow.

Find out about the key risks to this DaVita narrative.

Another View: SWS DCF Model Flags Overvaluation

There is also a more cautious lens on DaVita. Our DCF model, which values the stock on estimated future cash flows, points to a fair value of $198.69. With the current price at $239.46, that view suggests DaVita is trading on the expensive side. Which story do you think fits your assumptions?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out DaVita for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 49 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

Sentiment around DaVita is clearly split, with both risks and rewards in focus. It therefore makes sense to review the data promptly and form your own view based on the 3 key rewards and 2 important warning signs.

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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.

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