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Bull of the Day: DaVita (DVA) The Rise of DaVita: A Dominant Force in the Dialysis Industry

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DaVita (DVA) is a dominant force in the US dialysis service market, providing critical care to patients with chronic kidney failure. With a near duopoly shared with Fresenius, the company controls a significant portion of the kidney care market. Its widespread reach includes outpatient centers in 46 states and 351 centers across 11 countries globally, ensuring access to its vital services for a large number of patients.

Over the years, DaVita has proven to be a stalwart stock, delivering compound annual returns of 10.8%, exceeding industry averages and demonstrating consistent outperformance. Notably, the endorsement of legendary investor Warren Buffett, who owns nearly 40% of the company’s outstanding shares, adds to its allure for investors.

Earnings Momentum

The company’s positive trajectory is further underscored by its Zacks Rank #1 (Strong Buy) rating, reflecting ongoing upward earnings revisions. Analysts have steadily raised earnings estimates, with the last quarter’s EPS surpassing expectations by 48.4%. Forecasts for FY23 and FY24 indicate robust growth, with estimated earnings climbing to $8.07 and $8.46 per share, respectively.

Strategic Share Repurchases

DaVita’s commitment to shareholder value is evident through its consistent stock repurchase programs, effectively reducing total shares outstanding by an impressive 57% over the past decade. This strategic move reflects the company’s dedication to returning cash to its shareholders, a clear indication of its financial strength and commitment to long-term value creation.

Attractive Valuation

Despite its dominant position, DaVita’s current valuation presents an enticing prospect for investors. Trading at a historically discounted earnings multiple, well below industry and market averages, the stock offers significant potential. With projected annual earnings growth of 17.3%, the company’s PEG Ratio of 0.75x signals an undervalued opportunity based on its growth potential.

Outlook and Investment Potential

Leveraging its low relative valuation and high expected earnings growth, DaVita emerges as an attractive investment opportunity. Its near-monopolistic control over the dialysis industry and the prospect of Warren Buffett’s involvement further enhance its appeal. The company’s robust standing across Value, Growth, and VGM style scores, coupled with its position in the top 17% of the Zacks industry rank, solidifies its position as a top-tier healthcare stock for investors.

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DaVita Inc. (DVA) : Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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