I think it's worth assessing Davies as part of the wider group of players we have who (in theory at least) can play in central midfield. Apart from Allan and Doucoure, do we have ANYONE we genuinely want to keep for than another season?
1) Gbamin. Always injured. With youth on his side however, he has time left to resurrect his career and maybe become an important part of the squad.
Verdict: keep.
2) Delph. Always injured. Never been fit enough for long enough to show what he can do. Does not have youth on his side. Is on a hefty wage.
Verdict: sell.
3) Gomes. A shadow of the player he was pre-injury. Very slow, to the point of possibly being incompatible with PL play. Defensive liability. Old enough that he isn't going to get quicker, young enough that he can still contribute for five years in another league. On a hefty wage.
Verdict: sell.
4) Voldemort. Another slow-moving individual, but one who occasionally pops up with a highlight-reel goal. Wrong side of 30, not going to get quicker. Hefty wage. Question mark over ongoing availability...
Verdict. Unlikely to play again, for us or any other club in England, very difficult to sell.
When viewed as part of a personnel group it's easy to see why Davies is NOT the first player we should be looking to sell. In fact, if we did somehow bring in another CM (by selling Delph or Gomes?) I'd still only loan young Thomas out. Get him 25 starts in the Prem for a Norwich, Brentford, Southampton or similar and he might start developing. At his age he needs to be playing every week.
I agree he is not good enough to displace Allan or Doucoure at the moment, but the problem is no-one else in the squad is either.