DAVITA INC. (DVA) stock intrinsic value fair value estimate & owner earnings analysis

DaVita is one of the two dominant U.S. kidney dialysis providers; its main competitor is Fresenius Medical Care. At December 31, 2025 it ran 2,657 outpatient dialysis centers in 46 states and the District of Columbia (2,605 consolidated, the rest partly owned or managed), with nearly 5,200 nephrologists referring patients, plus 585 centers in 14 other countries serving about 94,500 patients. Dialysis is non-deferrable, which is why the cash flows are durable, but the price is largely set by others: Medicare and Medicare Advantage are about 57% of U.S. dialysis revenue, Medicaid 7% and other government programs 3%. Commercial insurers pay far more per treatment and are about 26% of U.S. dialysis revenue from only about 11% of patients, so profit depends heavily on how many commercial patients stay commercial. Many centers are joint ventures with physicians, so a large share of cash generated is paid to outside partners ($324.3M of distributions in 2025, offset by $7.1M of partner contributions). The company also carries $10.8 billion of debt. The shares are valued here as what is left after the lenders and the outside partners are paid. How we measured earnings. We started from operating cash flow, removed the swings from working capital (receivables, payables, accruals and similar items), subtracted stock compensation as a real cost, and deducted only the capex needed to keep the centers running, treating a small slice of capex as growth in years when revenue rose. On that basis owner earnings per share were $4.29 (2016), $7.17, $3.74, $7.48, $10.82, $12.11, $9.03 (2022), $13.06, $16.44 and $19.56 (2025). That climb overstates how the business has done: diluted shares fell from 93.2 million in 2023 to 75.9 million in 2025 and 66.8 million were outstanding in February 2026 versus 63.8 million at July 31, 2026, so much of the per-share rise is buybacks (2025 repurchases were $1.31 billion in the open market plus $485 million from Berkshire Hathaway). Total owner earnings were $1,327M, $1,332M, $866M, $1,217M, $1,435M and $1,485M for 2020 through 2025. For the valuation we value the whole operation before lenders and partners, so we added back the cash interest paid ($326M, $279M, $351M, $388M, $423M, $515M for 2020-2025) and subtracted what partners take out net of their contributions ($210M, $212M, $253M, $266M, $323M, $317M). That cash flow before lenders was $1,443M (2020), $1,399M, $963M (2022), $1,338M, $1,536M and $1,683M (2025). We set the starting level at the median of these six years, $1,421M, for three reasons: the sale of its physician-practice business changed the company (a disposal-group write-down appears in 2018), so earlier years describe a different business; the window contains a full run from the 2022 low to the 2025 high; and a median avoids leaning on the best or worst single year. One item we could not reconcile: the 2025 cash-flow statement shows a $211M receivables build, yet reported receivables were flat at $1.61 billion and days of revenue outstanding improved from 52 to 49 on management's own measure. We removed working-capital movements as a matter of method, which lifts 2025 by $263M; if that outflow turned out to be permanent, 2025 would be about $1,420M, which is the same as our starting level. For that reason the bull case starts from the average of 2024 and 2025 rather than the 2025 peak. Cash of $669M at June 30, 2026 is treated as needed to run the centers and is not credited against debt. Growth check. Cash flow before lenders rose 9.6% in 2025 ($1,683M vs $1,536M); owner earnings rose 3.5%. Our base case assumes 0% in year 1 and stays flat, lower than the trailing figure. We found no dated reason in the filings to extend the 2025 jump: first-half 2026 operating cash flow was $811M against $504M a year earlier, which is supportive but is one half-year and does not change the level. Base case: $196 per share. The business keeps generating $1,421M a year with no growth, indefinitely. Evidence: a 2,657-center network that has produced between $963M and $1,683M every year since 2020, non-deferrable demand and annual Medicare rate updates. We credit no growth because we cannot point to a secured source: patient care costs per treatment rose in 2025 on drug and wage costs alongside higher rates, the temporary Medicare drug add-on payment for phosphate binders ends at the close of 2026 with the follow-on rate undetermined, and the company's own 2026 view is that the binder effect on operating income is about flat. Also left out: new clinical or home-dialysis programs and further buyback accretion (all value is divided by today's shares, about 65.5 million on a diluted basis). Business worth about $23.7 billion; it owes $10.8 billion; the difference is about $12.8 billion. The weighted average interest rate on the debt was 5.51% at year-end 2025, so no adjustment was made for cheap or expensive debt in this case. Bear case: $116 per share. A repeat of the 2022 trough (cash flow before lenders fell 31% from 2021 to $963M) for three years, followed by a permanent step down to $1,150M, about 19% below the starting level, from losing commercial-paying patients and rate leverage that the 26%-of-revenue commercial book depends on. Medicare and Medicare Advantage, the largest payers, set their own prices, which is what makes a lasting reset a named risk. Refinancing is also expensive: $4.49 billion falls due in 2030, including the Term Loan A-2 ($2.0 billion, due November 2030 if the 4.625% notes are still outstanding 91 days earlier), and we assume it reprices at the 6.75% the company is paying on its notes due July 2033, adding about $210M to the debt. Cash flow before lenders stays above the roughly $515M annual interest bill throughout. Business worth about $18.7 billion; it owes about $11.1 billion; the difference is about $7.6 billion. Bull case: $297 per share. Cash flow starts at $1,609M (average of 2024 and 2025), grows 2% a year for five years and 1% for five more, then holds flat. The pace is below the roughly 3.1% annual growth in this cash flow from 2020 to 2025 and revenue growth of about 4.1% a year from 2021 to 2025, and it stops when the record ends. Business worth about $30.3 billion; it owes $10.8 billion; the difference is about $19.5 billion. We left out any gain from share counts falling further. Debt. Total debt principal (including finance leases) was $10.85 billion at June 30, 2026. Scheduled maturities at December 31, 2025 were $109M (2026), $110M, $150M, $142M, then $4.49 billion in 2030 and $5.35 billion after, including the Term Loan B-2 ($1.87 billion, May 2031) and $1.035 billion of 6.75% notes due 2033. Several of these maturities cluster together in 2030-2031, which is the main structural pressure point. Stress test. We tested the base case against the fact most likely to break it. If cash flow before lenders were $1,200M rather than $1,421M, the shares would be worth about $140; at $1,000M, about $89. Because debt is about 7.6 times the starting cash flow, each 10% change in that cash flow moves share value by roughly 18%. Price. Our certainty about the level is moderate: six years of history, a wide range, and an unreconciled 2025 working-capital item. The worst plausible event is a reimbursement reset hitting a business with $10.8 billion of debt and 2030-31 maturities clustered together; the structure survives because interest is well covered, but shareholders would absorb it. If our starting level is $1,200M the shares are worth about $140, and at $1,000M about $89. The price assumes a three-to-five-year holding period; during that period the business uses its cash flow to buy back stock and has a standing agreement to repurchase shares from Berkshire Hathaway so its stake does not exceed 45%. At the starting level the business generates roughly $13.80 per share a year after interest and before tax effects, so the margin-of-safety price is $105: a price from which the bear case implies no loss and the cash flow is about 13% of the price even if the level falls modestly while the gap to the base value closes. A prior analysis in August 2026 used a different basis for owner earnings and its figures are not comparable.