We came across a bullish thesis on DaVita Inc. (DVA) on wallstreetbets Subreddit Page by Isaac459. In this article, we will summarize the bulls’ thesis on DVA. DaVita Inc. (DVA)’s share was trading at $172 as of Feb 12th. DVA’s trailing and forward P/E were 18.53 and 14.86 respectively according to Yahoo Finance.
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DaVita, a leading provider of dialysis treatment for end-stage renal disease, has faced stagnation in organic volume growth due to elevated mortality rates, particularly from 2020 to the present. Despite increasing patient admissions, the overall number of dialysis treatments has remained flat for five years, as mortality rates have prevented substantial volume growth. This challenge has been a recurring theme in DaVita’s quarterly SEC filings, where the company consistently cites higher mortality as the main driver behind the lack of organic growth, despite benefiting from acquisitions and higher insurance reimbursements.
However, a key development in Q4 2024 suggests a turning point may be approaching. For the first time in nearly five years, the death rate for the 85+ age group—often used as a proxy for dialysis patients—declined by 4.9%, with an adjusted decrease of 6.9% when accounting for population growth. This shift suggests the potential for improved organic volume growth, with Q4 2024 expected to show a +1.7% increase in treatment volume, marking the first time in 18 quarters that DaVita has exceeded 1% growth. This change, driven by a reduction in mortality rates, could have significant implications for DaVita’s earnings per share and stock price.
Looking ahead, this trend may continue, as the dialysis patient population is now more resilient post-pandemic, following what is known as the “harvesting effect,” where the most vulnerable have already been lost. If this pattern of improved mortality persists, DaVita could see sustained growth in organic volume, potentially reaching around 7% annually over the next two years. Coupled with ongoing acquisitions, this sets the stage for substantial upside in the stock over the next 2-3 years. The market’s outlook on DaVita is poised to shift dramatically as this new trend unfolds.
DaVita Inc. (DVA) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 39 hedge fund portfolios held DVA at the end of the third quarter which was 34 in the previous quarter. While we acknowledge the risk and potential of DVA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DVA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.