Trade-Ideas: Quest Diagnostics (DGX) Is Today's

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.

Trade-Ideas LLC identified Quest Diagnostics ( DGX) as a "perilous reversal" (up big yesterday but down big today) 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 $201.0 million.
  • DGX has traded 100,526 shares today.
  • DGX is down 4% today.
  • DGX was up 7.7% yesterday.

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More details on DGX:

Quest Diagnostics Incorporated provides diagnostic testing information services in the United States and internationally. The stock currently has a dividend yield of 2%. DGX has a PE ratio of 21. Currently there are 2 analysts that rate Quest Diagnostics a buy, 3 analysts rate it a sell, and 14 rate it a hold.

The average volume for Quest Diagnostics has been 1.5 million shares per day over the past 30 days. Quest has a market cap of $10.7 billion and is part of the health care sector and health services industry. The stock has a beta of 0.06 and a short float of 11.5% with 4.88 days to cover. Shares are up 10.2% year-to-date as of the close of trading on Thursday.

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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 solid stock price performance, revenue growth and expanding profit margins. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Compared to its closing price of one year ago, DGX's share price has jumped by 28.66%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, DGX should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 13.3%. Since the same quarter one year prior, revenues slightly increased by 5.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • 40.95% is the gross profit margin for QUEST DIAGNOSTICS INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 3.31% is above that of the industry average.
  • QUEST DIAGNOSTICS INC's earnings per share declined by 40.8% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, QUEST DIAGNOSTICS INC reported lower earnings of $3.77 versus $5.34 in the prior year. This year, the market expects an improvement in earnings ($4.80 versus $3.77).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Health Care Providers & Services industry. The net income has significantly decreased by 41.3% when compared to the same quarter one year ago, falling from $104.00 million to $61.00 million.

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