DaVita HealthCare Partners Inc (DVA)

Conclusion

DaVita Inc. provides kidney dialysis services for patients with chronic kidney failure in the United States, operating outpatient dialysis centers and related laboratory services. At a price of 185.54 USD on 2026-11-09, the market capitalisation is 11.7 billion USD and the enterprise value is 24.5 billion USD.

The verdict is undervalued. The price-to-earnings ratio of 12.7 sits below its ten-year median of 16.6, and EV to EBITDA of 8.7 sits below its median of 9.6. The discounted cash flow gives 300.33 USD per share at a discount rate of 9.18%, while the fair value from historical multiples is 223.95 USD. The fair value band runs from 209.72 to 314.57 USD with a midpoint of 262.14 USD, a margin of safety of 41.3% at the current price. The reverse DCF implies growth of -3.4% a year, against revenue growth of 3.4% a year over five years and free cash flow per share growth of 6.9% a year.

What holds the case up is the return on capital: ROIC of 13.4% against a WACC of 6.3%, free cash flow conversion of 140.6% on a trailing basis, and a five-year share count change of -6.4% a year. What could break it is leverage and solvency: net debt to EBITDA of 4.58x, interest coverage of 3.76x, and an Altman Z-score of 1.71. Revenue over ten years has shown a compound change of -0.1% a year.

Financial health

Financial health is red: the current ratio of 1.41 holds it up, while net debt to EBITDA of 4.58x and an Altman Z-score of 1.71 pull it down. The quick ratio is 1.26 and interest coverage is 3.76x on a trailing basis. The Altman Z-score falls in the distress zone, but the model was designed for manufacturers and this company is not one, so the reading should be treated with caution. Insolvency risk: medium, about 5.9% by the estimate of the Ohlson model over one to two years, based on figures as of 2025-12-31. The debt to equity ratio is not available because the company has negative equity.

Earnings quality

Earnings quality is green, supported by free cash flow conversion, the falling share count and a low Beneish reading. Free cash flow conversion is 140.6% on a trailing basis and 166.6% over five years. The accrual ratio is -6.6%, which means cash earnings exceed reported earnings. Stock-based compensation is 0.9% of revenue, and free cash flow after it is 1.17 billion USD. The share count fell 6.4% a year over five years, which reflects buybacks. The Piotroski score is 5 out of 9, and the Beneish M-score of -2.53 is read as unlikely to signal manipulation. The company beat estimates in 6 of the last 8 quarters, with an average surprise of 2.7%. Estimates for the current year fell 1.4% over 90 days and for next year fell 2.0%.

Profitability

Profitability is green, with ROIC clearly above the cost of capital. Gross margin is 31.0% against a ten-year median of 30.1%, operating margin is 14.8% against 14.6%, and net margin is 6.5% against 6.0%. Operating margin stability is 10.1%. ROIC is 13.4% against a WACC of 6.3%, giving a ROIC minus WACC value of 7.1%, which the model labels as creating value. The five-year median ROIC is 10.2%. Return on equity is not available because the company has negative equity, so the DuPont split is used instead: net margin of 5.5%, asset turnover of 0.78 and an equity multiplier of 15.1x. The high equity multiplier shows that leverage, not margin alone, is lifting the return on equity.

Growth

Growth is green, mainly because forward earnings expectations are firm, though the long-run revenue record is weak. Revenue compounded at 5.5% a year over three years, 3.4% over five years, and -0.1% over ten years. Earnings per share compounded at 13.2% over three years, 6.1% over five years and 21.1% over ten years. Free cash flow per share compounded at 14.1% over three years and 6.9% over five years. Revenue grew in 7 of the last 10 comparable years. Next year's earnings estimate implies growth of 14.9%, although estimates have been revised slightly down over the last 90 days.

Valuation

Valuation is green, with the price below its own history on every multiple shown. The price-to-earnings ratio of 12.7 compares with a ten-year median of 16.6, a premium of -23.4%. EV to EBITDA of 8.7 compares with 9.6, a premium of -8.6%. Price to free cash flow of 9.0 compares with 9.6, a premium of -6.1%, and price to sales of 0.82 compares with 1.00, a premium of -17.8%. The discounted cash flow gives 300.33 USD per share at a discount rate of 9.18%, with a first-stage growth rate of 3.4% and a terminal growth rate of 2.5%. The terminal value makes up 53.7% of that figure. The fair value from historical multiples is 223.95 USD. The fair value band is an order of magnitude built on fixed assumptions, including a 5% equity risk premium and capped growth, and is not a price target. The reverse DCF implies growth of -3.4% a year. The company pays no dividend.

Risks

The main risk is leverage: net debt to EBITDA of 4.58x leaves little room if EBITDA falls, and interest coverage of 3.76x would shrink quickly under higher rates or lower earnings. A reading of 1.71 on the Altman Z-score, together with negative equity, means the balance sheet has little cushion. Weak long-run revenue, with a ten-year change of -0.1% a year, and falling estimates for both the current and next year would weaken the growth case. The discounted cash flow rests heavily on the terminal value, which is 53.7% of the figure, so a small change in the discount rate or terminal growth would move the result a long way. Debt to equity and return on equity are not available. This analysis has no debt maturity schedule and no revenue split by segment, so it cannot judge refinancing risk or which business lines drive the results.