Should Value Investors Buy DaVita HealthCare (DVA) Stock?

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One company to watch right now is DaVita HealthCare (DVA). DVA is currently sporting a Zacks Rank of #1 (Strong Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 11.33 right now. For comparison, its industry sports an average P/E of 21.19. DVA's Forward P/E has been as high as 15.61 and as low as 9.37, with a median of 11.89, all within the past year.

We also note that DVA holds a PEG ratio of 0.56. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. DVA's industry has an average PEG of 1.61 right now. Over the last 12 months, DVA's PEG has been as high as 0.69 and as low as 0.42, with a median of 0.54.

Another notable valuation metric for DVA is its P/B ratio of 3.88. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 6.39. Over the past year, DVA's P/B has been as high as 4.89 and as low as 1.77, with a median of 3.55.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. DVA has a P/S ratio of 0.72. This compares to its industry's average P/S of 0.95.

These figures are just a handful of the metrics value investors tend to look at, but they help show that DaVita HealthCare is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, DVA feels like a great value stock at the moment.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
DaVita Inc. (DVA) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research