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Valued at a market cap of $9.4 billion, DaVita Inc. (DVA) provides kidney dialysis services for patients suffering from chronic kidney failure. The Denver, Colorado-based company also offers outpatient, hospital inpatient, and home-based hemodialysis services, as well as clinical laboratory services.
Companies worth $2 billion or more are typically classified as “mid-cap stocks,” and DaVita fits the label perfectly, with its market cap exceeding this threshold, underscoring its size, influence, and dominance within the medical care facilities industry. The company’s strength lies in its extensive network of dialysis centers across the U.S., which allows it to serve a large and growing population of patients with chronic kidney disease.
This healthcare company has slipped 27% from its 52-week high of $179.60, reached on Jan. 31. Shares of DVA have declined 4.2% over the past three months, considerably underperforming the Nasdaq Composite’s ($NASX) 17.2% return during the same time frame.
In the longer term, DVA has fallen 20% over the past 52 weeks, significantly lagging behind NASX's 27% uptick over the same time period. Moreover, on a YTD basis, shares of DVA are down 12.3%, compared to NASX’s 18% rise.
To confirm its bearish trend, DVA has been trading below its 200-day moving average since mid-February, with slight fluctuations, and has remained below its 50-day moving average since late July.
DVA delivered its Q2 results on Aug. 5, and its shares tumbled more than 9% in the following trading session. The company's total revenue improved 6.1% year-over-year to $3.4 billion, with dialysis patient service revenues growing by 4.8% from the year-ago quarter. Moreover, its adjusted EPS of $2.95 advanced 47.5% from the previous quarter, driven by strong margin expansions. However, its operating cash flow declined by a notable 59.4% from the year-ago quarter to $324 million. In comparison, its free cash flow fell 76% year-over-year to $157 million, weighing on investor sentiment.
DVA has also lagged behind its rival, Fresenius Medical Care AG (FMS), which soared 26.7% over the past 52 weeks and 13.5% on a YTD basis.
Looking at DVA’s recent underperformance, analysts remain cautious about its prospects. The stock has a consensus rating of "Hold" from the nine analysts covering it, and the mean price target of $153.57 suggests a 17.1% premium to its current price levels.
