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DaVita’s Stock Reacts to the Merger with The Everett Clinic

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XBI large-cap stocks rise 0.9%

For the week ending March 4, 2016, the large-cap stocks within the SPDR S&P Biotech ETF (XBI) collectively returned 0.9%. The large-cap stocks within the iShares Nasdaq Biotechnology ETF (IBB) and the Health Care Select Sector SPDR Fund (XLV) rose 0.1% and 0.7%, respectively, during the week. Although large-cap biotech stocks rose during the week, they still underperformed the SPDR S&P 500 ETF (SPY), which rose 2.7%.

The above graph shows the performances of large-cap stocks within the above-mentioned biotech ETFs compared with the performance of the SPDR S&P 500 ETF (SPY) for the week ending March 4.

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DaVita HealthCare Partners completes acquisition of The Everett Clinic

DaVita HealthCare Partners (DVA) was one of the biggest winners for the week ending March 4 with a return of 6.1%. The stock rose as DaVita HealthCare Partners announced the closing of the previously announced acquisition of The Everett Clinic. The Everett Clinic’s 20 sites north of Seattle, Washington, will join DaVita HealthCare Partners’ expanding managed care business, along with more than 2,200 teammates caring for more than 315,000 patients.

DVA closed at $70.51 on March 4 and was trading above its 20-day and 100-day moving averages. It recorded a trading volume of ~1.5 million shares per day. DVA has a relative strength index reading of 69, indicating that the stock is moving toward a situation in which it is considered overbought.

DVA has a book value of $23.22 per share. With its current price, the stock is trading at a price-to-book value ratio of ~3.0x and a forward PE (price-to-earnings) ratio of ~18.0x for 2016. Its peers HCA Holdings (HCA) and Cigna Corporation (CI) are trading at lower forward PE multiples of ~11.6x and 15.1x, respectively. DVA has a weight of ~0.4% in XLV’s portfolio.

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