Since September 2024, DaVita has been in a holding pattern, posting a small loss of 4.3% while floating around $147.02. The stock also fell short of the S&P 500’s 3.7% gain during that period.

Is there a buying opportunity in DaVita, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.

We're sitting this one out for now. Here are three reasons why we avoid DVA and a stock we'd rather own.

Why Is DaVita Not Exciting?

Founded in 1994, DaVita Inc. (NYSE:DVA) provides dialysis services to patients with chronic kidney failure and end-stage renal disease, offering both in-center and at-home treatment options.

1. Long-Term Revenue Growth Disappoints

A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Regrettably, DaVita’s sales grew at a tepid 2.4% compounded annual growth rate over the last five years. This was below our standards.

2. Sales Volumes Stall, Demand Waning

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful Outpatient & Specialty Care company because there’s a ceiling to what customers will pay.

Over the last two years, DaVita failed to grow its treatments, which came in at 7.28 million in the latest quarter. This performance was underwhelming and implies there may be increasing competition or market saturation. It also suggests DaVita might have to lower prices or invest in product improvements to accelerate growth, factors that can hinder near-term profitability.

3. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect DaVita’s revenue to rise by 5%, close to its 5.1% annualized growth for the past two years. This projection is underwhelming and implies its newer products and services will not accelerate its top-line performance yet.

Final Judgment

DaVita isn’t a terrible business, but it isn’t one of our picks. With its shares trailing the market in recent months, the stock trades at 13× forward price-to-earnings (or $147.02 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. We're pretty confident there are more exciting stocks to buy at the moment. Let us point you toward one of Charlie Munger’s all-time favorite businesses.

Stocks We Would Buy Instead of DaVita

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