DaVita, Inc. (DVA) - Bull of the Day

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We are upgrading our recommendation on DaVita, Inc. ( DVA ) to Outperform based on the company's strong cash flows and strategic acquisitions. The new bundled ESRD payment system is also expected to be a long-term positive. The company's third-quarter earnings slightly exceeded the Zacks Consensus Estimate on the back of strong top-line growth, partially offset by higher operating expenses.

Moreover, a strong cash position expands the potential for meaningful M&A. While the acquisition of DSI should bring in new opportunities in most states, the company has to divest some of its centers as a condition. Nevertheless, we believe downside from current levels is likely limited.

Our six-month target price of $96.00 equates to 19.0x our earnings estimate for 2011. This price target implies an expected total return of 20.3% over that period. This is consistent with our Outperform recommendation on the shares.
 
DAVITA INC ( DVA ): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks

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