Investment Thesis
DaVita operates a functionally profitable healthcare business with 6.5% revenue growth and 14.1% operating margins, demonstrating operational viability. However, severe balance sheet distress—negative stockholders' equity of -$755.5M, $10.7B long-term debt, and critically low interest coverage of 0.9x—indicates the company cannot cover interest expenses from operations. Declining net income despite revenue growth and minimal ROA of 1.1% suggest financial viability is at risk without significant deleveraging.
Strengths
- Positive revenue growth of 6.5% YoY demonstrates underlying business demand in essential dialysis services
- Operating margin of 14.1% shows reasonable operational efficiency and cost management
- Positive free cash flow of $218.8M provides liquidity for debt service despite financial distress
Risks
- Interest coverage ratio of 0.9x—operating income cannot cover interest expenses; unsustainable debt service trajectory
- Negative stockholders' equity of -$755.5M indicates balance sheet insolvency; equity completely impaired
- Net income declined 13.8% YoY while revenue grew 6.5%, signaling rising operational costs or escalating financing burden
- Extreme leverage with $16.5B liabilities against $17.5B total assets leaves minimal margin for operational deterioration
- Low ROA of 1.1% indicates poor asset utilization and value creation
Key Metrics to Watch
- Interest coverage ratio trend—must move above 1.5x for sustainability
- Net income trajectory—must reverse decline and resume growth to support debt service
- Debt reduction progress—focus on absolute debt levels and debt-to-EBITDA multiple
- Operating cash flow stability—critical to monitor ongoing liquidity generation
- Stockholders' equity path to positive—measure of balance sheet recovery
Financial Metrics
Revenue
3.4B
Net Income
197.5M
EPS (Diluted)
$2.87
Free Cash Flow
218.8M
Total Assets
17.5B
Cash
644.2M
Profitability Ratios
Gross Margin
N/A
Operating Margin
14.1%
Net Margin
5.8%
ROE
N/A
ROA
1.1%
FCF Margin
6.4%
Balance Sheet & Liquidity
Current Ratio
1.42x
Quick Ratio
1.37x
Debt/Equity
N/A
Debt/Assets
94.0%
Interest Coverage
0.89x
Long-term Debt
10.7B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-07T08:45:02.597291 |
Data as of: 2026-03-31 |
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