Select Medical Holdings Corporation (SEM) and Quest Diagnostics (DGX) Financial Review

Select Medical Holdings Corporation (NYSE: SEM) and Quest Diagnostics (NYSE:DGX) are both mid-cap medical companies, but which is the superior stock? We will compare the two businesses based on the strength of their institutional ownership, earnings, valuation, analyst recommendations, dividends, profitability and risk.

Profitability

This table compares Select Medical Holdings Corporation and Quest Diagnostics’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Select Medical Holdings Corporation 1.95% 9.61% 1.84%
Quest Diagnostics 9.28% 15.66% 7.24%

Insider and Institutional Ownership

79.0% of Select Medical Holdings Corporation shares are owned by institutional investors. Comparatively, 87.1% of Quest Diagnostics shares are owned by institutional investors. 19.9% of Select Medical Holdings Corporation shares are owned by insiders. Comparatively, 1.8% of Quest Diagnostics shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Earnings & Valuation

This table compares Select Medical Holdings Corporation and Quest Diagnostics’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Select Medical Holdings Corporation $4.26 billion 0.56 $474.80 million $0.64 27.97
Quest Diagnostics $7.59 billion 1.63 $1.44 billion $4.96 18.32

Quest Diagnostics has higher revenue and earnings than Select Medical Holdings Corporation. Quest Diagnostics is trading at a lower price-to-earnings ratio than Select Medical Holdings Corporation, indicating that it is currently the more affordable of the two stocks.

Risk & Volatility

Select Medical Holdings Corporation has a beta of 1.42, indicating that its share price is 42% more volatile than the S&P 500. Comparatively, Quest Diagnostics has a beta of 0.65, indicating that its share price is 35% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Select Medical Holdings Corporation and Quest Diagnostics, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Select Medical Holdings Corporation 1 2 3 0 2.33
Quest Diagnostics 1 7 6 0 2.36

Select Medical Holdings Corporation presently has a consensus price target of $18.80, indicating a potential upside of 5.03%. Quest Diagnostics has a consensus price target of $108.75, indicating a potential upside of 19.69%. Given Quest Diagnostics’ stronger consensus rating and higher probable upside, analysts clearly believe Quest Diagnostics is more favorable than Select Medical Holdings Corporation.

Dividends

Quest Diagnostics pays an annual dividend of $1.80 per share and has a dividend yield of 2.0%. Select Medical Holdings Corporation does not pay a dividend. Quest Diagnostics pays out 36.3% of its earnings in the form of a dividend. Quest Diagnostics has raised its dividend for 5 consecutive years.

Summary

Quest Diagnostics beats Select Medical Holdings Corporation on 13 of the 17 factors compared between the two stocks.

About Select Medical Holdings Corporation

Select Medical Holdings Corporation is an operator of specialty hospitals, outpatient rehabilitation clinics and occupational medicine centers in the United States. The Company’s segments include specialty hospitals, outpatient rehabilitation, Concentra and Other. The specialty hospitals segment consists of hospitals designed to serve the needs of long term acute patients and hospitals designed to serve patients that require intensive medical rehabilitation care. The outpatient rehabilitation segment consists of clinics that provide physical, occupational, and speech rehabilitation services. The Concentra segment consists of medical centers and contract services provided at employer worksites and Department of Veterans Affairs community-based outpatient clinics (CBOCs) that deliver occupational medicine, physical therapy, veteran’s healthcare, and consumer health services. As of December 31, 2016, the Company had operations in 46 states and the District of Columbia.

About Quest Diagnostics

Quest Diagnostics Incorporated is a provider of diagnostic information services. The Company operates through two businesses: Diagnostic Information Services and Diagnostic Solutions. The Diagnostic Information Services business develops and delivers diagnostic testing information and services, providing insights that empower and enable a range of customers, including patients, clinicians, hospitals, integrated delivery networks (IDNs), health plans, employers and accountable care organizations (ACOs). Its Diagnostic Solutions group includes its risk assessment services business, which offers solutions for insurers, and its healthcare information technology businesses, which offers solutions for healthcare providers. The Company’s services are provided under the Quest Diagnostics brand, but it also provides services under other brands, including AmeriPath, Dermpath Diagnostics, Focus Diagnostics, Athena Diagnostics, ExamOne, Quanum and Care360.

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