Quest Diagnostics (DGX) Stock Storming The Castle Today

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Quest Diagnostics ( DGX) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Quest Diagnostics as such a stock due to the following factors:

  • DGX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $123.0 million.
  • DGX has traded 778,691 shares today.
  • DGX is trading at 2.71 times the normal volume for the stock at this time of day.
  • DGX crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on DGX:

Quest Diagnostics Incorporated provides diagnostic testing information services in the United States and internationally. The company operates in two businesses, Diagnostic Information Services and Diagnostic Solutions. The stock currently has a dividend yield of 2.4%. DGX has a PE ratio of 10.5. Currently there are 2 analysts that rate Quest Diagnostics a buy, 4 analysts rate it a sell, and 12 rate it a hold.

The average volume for Quest Diagnostics has been 2.4 million shares per day over the past 30 days. Quest has a market cap of $8.0 billion and is part of the health care sector and health services industry. The stock has a beta of 0.62 and a short float of 14.1% with 9.53 days to cover. Shares are up 4.4% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Quest Diagnostics as a buy. The company's strengths can be seen in multiple areas, such as its notable return on equity, good cash flow from operations, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Health Care Providers & Services industry and the overall market, QUEST DIAGNOSTICS INC's return on equity exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly increased by 77.80% to $84.00 million when compared to the same quarter last year. In addition, QUEST DIAGNOSTICS INC has also vastly surpassed the industry average cash flow growth rate of -0.53%.
  • 40.66% is the gross profit margin for QUEST DIAGNOSTICS INC which we consider to be strong. Regardless of DGX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, DGX's net profit margin of 5.95% compares favorably to the industry average.
  • QUEST DIAGNOSTICS INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, QUEST DIAGNOSTICS INC increased its bottom line by earning $5.34 versus $3.91 in the prior year. For the next year, the market is expecting a contraction of 24.5% in earnings ($4.03 versus $5.34).
  • DGX, with its decline in revenue, underperformed when compared the industry average of 10.6%. Since the same quarter one year prior, revenues slightly dropped by 2.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
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