DaVita Inc (DVA, Financial) saw its stock drop by 10.8% today, with shares priced at $141.22, as investors responded to the company's latest earnings report. The earnings fell short of expectations, contrasting with a slight decline in the S&P 500 index.
In its third-quarter earnings, DaVita reported revenues of $3.26 billion, a rise from $3.12 billion during the same period last year. Despite this increase, the company's adjusted net income fell to $222 million, or $2.59 per share, compared to $268 million the year before. This result came in below the analyst consensus of $2.72 per share, though revenues slightly surpassed the $3.25 billion forecast.
The revenue growth was attributed to higher average reimbursement rates and typical annual rate adjustments, including those from Medicare, along with an increase in hospital inpatient dialysis treatments.
Looking towards 2024, DaVita projects adjusted earnings per share between $9.25 and $10.05 and anticipates free cash flow between $950 million and $1.2 billion. In 2023, the figures were $8.47 per share and nearly $1.24 billion in free cash flow. The company, however, did not provide revenue estimates for the upcoming year.
DaVita's stock analysis shows the company has a market capitalization of $11.58 billion and a price-to-earnings (P/E) ratio of 15.04. Despite the recent decline, the stock is trading close to a 10-year high in terms of its price and price-to-book (P/B) ratio. The company's GF Value suggests that DaVita is "Modestly Overvalued" with a GF Value estimate of $119.78, which you can view in detail on the GF Value page.
DaVita's financial health shows a mixed picture. The Piotroski F-Score indicates a healthy situation, whereas the Altman Z-score places the company in a distress zone, implying potential bankruptcy risk in the next two years. Despite these challenges, DaVita maintains predictable revenue and earnings growth.
Investors should be cautious due to the company's significant reliance on government reimbursement rates, as two-thirds of U.S. sales come at Medicare rates. Notably, while commercial insurers account for only 10% of U.S. patients, they represent nearly all of the U.S. dialysis business's profits.
