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Here's Why You Should Retain DaVita (DVA) in Your Portfolio

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DaVita Inc. (DVA - Free Report) is gaining prominence in the MedTech space, courtesy of its incessant efforts to upgrade services, global expansion initiatives and acquisitions. The company has a market capitalization of approximately $8.36 billion.

The stock currently carries a Zacks Rank #3 (Hold).

Price Performance

Shares of DaVita have lost 2.4%, against the industry’s growth of 5.4% on a year-to-date basis. Further, the stock compares unfavorably with the S&P 500 Index’s rally of 12.3%.



What’s Deterring the Stock?

With respect to business strategy, DaVita has been growing through acquisitions of dialysis centers and other businesses. The company is also gaining from entry into joint ventures and expansion into new business models. This in turn can adversely affect operational performance, debt-to-capital ratio, capital expenditures and other aspects of business.

This apart, the company’s decision to divest DMG segment is anticipated to lower cash flows. Management has not given any assurance with regard to generation of sufficient cash flows in the near term required to finance debts or to fund other liquidity needs.

Factors to Boost DaVita

DaVita has remained committed toward expansion related to international markets. In the last few years, the company has strengthened position in the emerging and developing markets of Brazil, China, Colombia, Germany, India, Malaysia, the Netherlands, Poland, Portugal and Saudi Arabia through strategic alliances and acquisitions of dialysis centers.

These strategic efforts are anticipated to help DaVita deliver more efficient patient care. Currently, the company is pursuing expansion in major European and Asian countries via acquisitions and partnerships.

In the United States, DaVita has witnessed strong demand of dialysis services in recent times. Prudent acquisitions of dialysis centers and businesses, which own and operate dialysis centers as well as other ancillary services, is the company’s key business strategy. These initiatives have aided the company’s top line to improve significantly over a considerable period of time.

In the first quarter of 2019, the company provided dialysis services at 2,932 outpatient dialysis centers, of which 2,689 centers were located in the United States and 243 in nine countries outside the United States. Although, 2018 U.S. dialysis and related lab services’ revenues grossed $2.55 billion, which declined 3.3% from the year-ago quarter, international dialysis patient service and other revenues totaled $120 million, up 3.2% year over year.

Which Way Are Estimates Headed?

For 2019, the Zacks Consensus Estimate for revenues is pegged at $11.39 billion, down 0.1% year over year. For adjusted earnings, the same is pinned at $4.26, up 19.3% year over year.

Key Picks

Some better-ranked stocks from the broader medical space are Cardiovascular Systems, Inc. , Quidel Corporation (QDEL - Free Report) and Heamonetics Corporation (HAE - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cardiovascular Systems has earnings growth rate for fiscal fourth quarter of 2019 of 33.3%.

Quidel Corporation has a long-term earnings growth rate of 25%.

Heamonetics has a long-term earnings growth rate 13.5%.

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