Quest Diagnostics, Inc. (NYSE:DGX)

12m27.5
6m15.7
3m22

Continue to lose share to hospital labs as hospitals become more integrated. Also a target for reimbursement rate reductions because lab services may be viewed as commodities that payers can source from the lowest bidder.

Magic formula pick

Low p/e p/b and p/s with solid profits dividends and return of equity. It has quite a bit of debt (debt to equity of .8), but still has decent cash flow. No real growth.

Good entry

12/13

babo

Price/Share - 1.4
Price/Earnings - 15
Price/Book - 2.6

Over the last 10 years or so Quest has never traded below these multipliers. So if Quest Diagnostics performance on par with S&P500 and there is just a slight multiple expansion towards the more typical than Quest will probably be outperforming the Price of S&P.

Clean facilities and well-integrated IT systems from the patient side - you can schedule appointments online and find locations easily. This significantly cuts down on in-office wait time. All labeling is automated and efficient. I would assume the back-office IT is run as smoothly as the customer-facing side to allow for more efficiencies, but I could be wrong. Appears cheap/similar-price relative to peers although it is the dominant player. With aging population need for DGX services will increase

Piotroski screen.

Also fits my criteria fairly well, except for the debt/equity ratio.

It is a tale of over-optimism to think ObamaCare won't go after medical laboratories and medical device makers. Quest is in a duopoly with LabCorp in the testing market in the US and the press on margins doesn't bear well for either.

Added 8/12/10

Strong ROE with ability to grow. I like this company due to its strong competitive position, effectively sharing the market with Labcorp, backed up by strong scale benefits. The company should also experience strong growth due to the oh-so-talked-about baby boomer aging and potential overall medical savings from increased screening. There is the potential of exponential growth in screening with genome based tests, which could help prevent or decrease the negative impact of a large number of major conditions(I see this as more of a built in option as the ability to prediagnose is uncertain in both impact and timing). This company, despite its competitive advantages, runs the risk of a shrinking market if select tests are made easier to perform and can therefore be performed in the doctors office(this distinction is made by a government organization). At its current pricing I believe this company should be able to outpace the S&P in the vast majority of situations.

This stock is well run, unleveraged and has a low P/E

Quest Diagnostics purchased the outreach business (Caritas Medical Laboratories) of Caritas Christi Healthcare. They paid a premium sum for this business and it has been nothing short of a disaster so far. Only approximately 50% of the business has transitioned to Quest and a large number of doctors so vehemently dislike Quest that they refuse to send their laboratory work to Quest.

The Flu & VRML will make this move higher.

Ford Strong Buy, S&P (4 or 3 stars), Member of S&P 500

Medical diagnostics are on the up in the coming years. More and more posibilities to diagnose diseases by biomarkers and genetics - and this company is one of the big players

good defensive sector in current mkt (08/07/09)