Quest Diagnostics Inc (DGX) Stock Analysis and Metrics

Sector: Healthcare Industry: Diagnostics & Research CIK: 0001022079

P/B 2.82

P/E 21.13

P/S 1.89

Market Cap 20.47 Bn

ROIC (Qtr) 8.55

Div Yield % 1.73

Rev 1y % (Qtr) 13.18

Total Debt (Qtr) 6.38 Bn

Debt/Equity (Qtr) 0.88

About

Quest Diagnostics Inc., known by its ticker symbol DGX, is a prominent player in the healthcare industry, specializing in diagnostic information services. The company's operations span across the healthcare ecosystem, with a strategic focus on growth generation and operational efficiency. Quest Diagnostics' primary business activities revolve around providing diagnostic information services, catering to a diverse range of customers including physicians, hospitals, health plans, and employers. The company's services extend to approximately half...

Quest Diagnostics Inc., known by its ticker symbol DGX, is a prominent player in the healthcare industry, specializing in diagnostic information services. The company's operations span across the healthcare ecosystem, with a strategic focus on growth generation and operational efficiency.

Quest Diagnostics' primary business activities revolve around providing diagnostic information services, catering to a diverse range of customers including physicians, hospitals, health plans, and employers. The company's services extend to approximately half of the physicians and hospitals in the United States, offering a comprehensive test menu, innovative test offerings, reference testing, professional laboratory services, and outreach lab operations.

The company's revenue generation is primarily driven by its core products and services, which include clinical testing, anatomic pathology, and risk assessment services. Quest Diagnostics has a significant presence in the patient and consumer channel, with approximately 2,000 patient service centers and a mobile phlebotomy service. The company also offers advanced diagnostics in areas such as molecular genomics, oncology, and neurology, with a portfolio of oncology tests that includes traditional oncology screening and anatomic pathology.

In the highly competitive diagnostic information services market, Quest Diagnostics has established a strong position, bolstered by its robust testing capabilities and extensive network of patient service centers. The company's strong logistics capability, with over 73,000 stops daily, approximately 4,500 courier vehicles, and 19 aircraft serving the United States, further enhances its competitive edge.

Quest Diagnostics' commitment to innovation is evident in its long history of using advanced technologies to automate processes, improve customer service, generate insights from lab and other data, and stimulate innovation. The company is now leveraging AI to enhance the quality of its screening and diagnostic capabilities, and expects to continue leading the innovative, responsible, and secure use of AI in the diagnostic information services market.

The company's Diagnostic Information Services business provides insights from laboratory testing results, empowering people, physicians, and organizations to make informed decisions for improved health outcomes. This business encompasses a wide range of services, including clinical testing, anatomic pathology, and advanced diagnostics.

Furthermore, Quest Diagnostics' Diagnostic Solutions group includes its risk assessment services business, ExamOne, the largest provider of risk assessment services to the life insurance industry in North America. This business offers underwriting support services, including data gathering, paramedical examinations, and clinical laboratory testing and analytics. The company's healthcare IT solutions, including its products and national healthcare provider network, empower healthcare organizations and clinicians by leveraging the power of its significant information assets and technology prowess.

Stock Price Chart

Analysis

Pros

Operating cash flow of 1.89B provides exceptional 33.07x coverage of minority interest expenses 57M, showing strong core operations.
Operating cash flow of 1.89B provides strong 20.94x coverage of stock compensation 90M, indicating sustainable incentive practices.
Robust free cash flow of 1.39B exceeds capital expenditure of 492M by 2.83x, indicating strong organic growth funding capability.
Retained earnings of 9.84B provide full 1.72x coverage of long-term debt 5.71B, indicating strong internal capital position.
Robust tangible asset base of 5.63B provides 20.64x coverage of working capital 273M, indicating strong operational backing.

Cons

Operating cash flow of 1.89B barely covers its investment activities of (942M), with a coverage ratio of -2, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
Operating cash flow of 1.89B provides thin coverage of dividend payments of (347M) with a -5.43 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
Cash reserves of 432M provide limited coverage of acquisition spending of (434M), which is -1x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
High receivables of 1.46B relative to inventory of 186M (7.83 ratio) suggests aggressive credit terms or collection difficulties, potentially masking revenue quality issues.
Operating earnings of 1.53B show weak coverage of depreciation charges of 560M, with a 2.74 ratio indicating high capital intensity and potential reinvestment needs.

Peer Comparison

Companies in the Diagnostics & Research

S.No.	Ticker	Company	Market Cap	P/E	P/S	Total Debt (Qtr)
1	TMO	Thermo Fisher Scientific Inc.	216.83 Bn	33.00	4.96	35.68 Bn
2	DHR	Danaher Corp /De/	162.47 Bn	46.38	6.69	16.86 Bn
3	IDXX	Idexx Laboratories Inc /De	56.88 Bn	55.36	13.65	1.09 Bn
4	A	Agilent Technologies, Inc.	39.82 Bn	32.64	5.87	3.41 Bn
5	IQV	Iqvia Holdings Inc.	38.85 Bn	30.28	2.44	15.19 Bn
6	NTRA	Natera, Inc.	31.32 Bn	-101.29	14.80	0.18 Bn
7	MTD	Mettler Toledo International Inc/	28.99 Bn	34.68	7.35	2.21 Bn
8	WAT	Waters Corp /De/	22.92 Bn	35.32	7.38	1.49 Bn

Industry Comparisons

Current Valuation

Metric	Value	Industry
EV to Assets	1.64	2.69
EV to Cash from Ops.	14.08	18.14
EV to Debt	4.16	52.51
EV to EBIT	17.29	19.22
EV to EBITDA	12.69	4.35
EV to Free Cash Flow [EV/FCF]	19.05	2.84
EV to Market Cap	1.30	1.52
EV to Revenue	2.45	4.79
Price to Book Value [P/B]	2.82	1.34
Price to Earnings [P/E]	21.13	22.02

Dividend Metrics

Metric	Value	Industry
Dividend Coverage Ratio	2.79	-1.96
Dividend Payout Ratio %	35.90	2.83
Dividend per Basic Share	2.35	0.19
FCF Dividend Payout Ratio %	18.89	1.92
Interest Coverage	5.79	-126.58

Growth Metrics

Metric	Value	Industry
Capex Growth (1y) %	-31.55	-31.50
Cash and Equivalents Growth (1y) %	-43.46	21.37
Dividend Growth (1y) %	-20.61	0.24
EBIAT Growth (1y) %	19.84	-55.24
EBITDA Growth (1y) %	21.64	-447.96
EBIT Growth (1y) %	21.63	-40.50
EBT Growth (1y) %	16.94	-70.94
EPS Growth (1y) %	14.89	-70.02
FCF Growth (1y) %	36.17	56.33
Gross Profit Growth (1y) %	15.73	185.11

Liquidity Ratios

Metric	Value	Industry
Asset Utilization Ratio	0.67	0.56
Cash Payout Ratio	0.15	0.01
Cash Ratio	0.20	1.21
Current Ratio	1.13	2.64
Debt to Equity Ratio	0.88	-0.80
Interest Cover Ratio	5.79	-126.58
Times Interest Earned	5.79	-126.58

Profitability

Metric	Value	Industry
EBITDA Margin %	19.30	-129.91
EBIT Margin %	14.15	-156.71
EBT Margin %	11.71	-162.23
Gross Margin %	33.30	47.70
Net Profit Margin %	8.90	-189.30

Quest Diagnostics Inc (NYSE: DGX)