Why Warren Buffett Likes DaVita HealthCare Partners Inc (DVA)?

The increasing number of people diagnosed with chronic kidney failure and ESRD guarantees that DaVita HealthCare Partners Inc (NYSE:DVA)’s business will continue to grow. Patients need treatment from a company that provides quality treatment & services at a more affordable price, and most importantly accepts Medicare.

Financial Performance

Over the past ten years, DaVita HealthCare Partners Inc (NYSE:DVA) has a good financial performance with revenue growth at 16.3% and EBITDA growth at 15.2%. Its Free Cash Flow (FCF) and book value growth were 13.2% percent and 26.3%, respectively. From 2003 to 2012, the company’s revenue increased from $2.04 billion to $8.1 billion, and net income surged from $176 million to $536 million. Its annual earnings per share grew from $1.86 to $6.25 over the past ten years.

The stock price of the company increased from its lowest level at $77 per share to its highest level at around $124 a share over the 52-week range.

Source: Yahoo! Finance

Over the past year, DaVita’s stock delivered 36.03% total returns, higher than the 9.60% total returns of the S&P 500. Its stock performance is also better than its primary competitor, Fresenius Medical Care AG & Co. (ADR) (NYSE:FMS) with 2.22% returns in one year.

Partnership & Expansion

Fresenius Medical Care AG & Co. (ADR) (NYSE:FMS) provides dialysis for patients suffering from chronic kidney failure with 3,160 dialysis centers in North America, Latin America, Europe, Africa, and Asia Pacific region. The company is providing dialysis treatment for 257, 916 patients worldwide. In 2012, the company posted $13.8 billion revenue and $1.18 billion net income or $3.89 earnings per share.

Early this year, DaVita HealthCare Partners Inc (NYSE:DVA) announced its partnership with Fresenius Medical Care AG & Co. (ADR) (NYSE:FMS). Under its agreement, DaVita will provide certain pharmacy services to Fresenius Medical Care starting on the latter part of 2013. The agreement allows DaVita to generate additional revenue and enables Fresenius Medical Care AG & Co. (ADR) (NYSE:FMS) to comply with the requirement of the U.S. Congress that some ESRD medications should be included in a bundled payment. DaVita Rx is the largest full-service pharmacy dedicated for the needs of kidney patients.

In 2012, DaVita HealthCare Partners Inc (NYSE:DVA) expanded its business by acquiring 22 dialysis centers and opening additional 22 dialysis centers in the United States. The company also purchased 10 dialysis centers and opened two dialysis centers in other countries.

Conclusion

DaVita’s financial record shows that its earnings and revenue grew steadily and it has the ability to maintain its profitability in the years ahead. The outstanding performance reflects that it has a good and capable management team. The company received numerous awards such as the Fortune World’s Most Admired Companies (from 2006 to 2012) and ranked third among health care facilities and number one in innovation. The Training Magazine also recognized the company as the number one national health care provider for employee training programs.

I think the best thing about investing in the DaVita HealthCare Partners Inc (NYSE:DVA) is that investors can easily predict its revenue growth based on the trend of the increasing number of people with kidney problems, and most importantly, their investments enable the company to expand and provide treatments to kidney patients.

The article Why Warren Buffett Likes DaVita originally appeared on Fool.com and is written by Marivic Cabural.

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