Head-To-Head Review: Quest Diagnostics (DGX) & HCA Holdings (HCA)

Quest Diagnostics (NYSE: DGX) and HCA Holdings (NYSE:HCA) are both large-cap healthcare companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, dividends, earnings, analyst recommendations, profitability, institutional ownership and risk.

Profitability

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

Net Margins Return on Equity Return on Assets
Quest Diagnostics 8.82% 15.53% 7.18%
HCA Holdings 6.13% -47.16% 7.23%

Institutional & Insider Ownership

88.5% of Quest Diagnostics shares are owned by institutional investors. Comparatively, 74.6% of HCA Holdings shares are owned by institutional investors. 1.8% of Quest Diagnostics shares are owned by company insiders. Comparatively, 2.9% of HCA Holdings shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Dividends

Quest Diagnostics pays an annual dividend of $1.80 per share and has a dividend yield of 1.9%. HCA Holdings does not pay a dividend. Quest Diagnostics pays out 37.5% of its earnings in the form of a dividend. HCA Holdings has raised its dividend for 5 consecutive years.

Valuation & Earnings

This table compares Quest Diagnostics and HCA Holdings’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Quest Diagnostics $7.52 billion 1.68 $645.00 million $4.80 19.26
HCA Holdings $41.49 billion 0.65 $2.89 billion $7.03 10.80

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

Analyst Ratings

This is a breakdown of recent ratings and target prices for Quest Diagnostics and HCA Holdings, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Quest Diagnostics 1 12 6 0 2.26
HCA Holdings 0 5 16 0 2.76

Quest Diagnostics currently has a consensus price target of $104.42, suggesting a potential upside of 12.93%. HCA Holdings has a consensus price target of $89.84, suggesting a potential upside of 18.38%. Given HCA Holdings’ stronger consensus rating and higher probable upside, analysts clearly believe HCA Holdings is more favorable than Quest Diagnostics.

Volatility and Risk

Quest Diagnostics has a beta of 0.59, indicating that its share price is 41% less volatile than the S&P 500. Comparatively, HCA Holdings has a beta of 0.5, indicating that its share price is 50% less volatile than the S&P 500.

Summary

HCA Holdings beats Quest Diagnostics on 10 of the 17 factors compared between the two stocks.

Quest Diagnostics Company Profile

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.

HCA Holdings Company Profile

HCA Healthcare, Inc., formerly HCA Holdings, Inc., is a holding company. The Company, through its subsidiaries, owns and operates hospitals and related healthcare entities. As of December 31, 2016, the Company operated in two geographically organized groups, including the National and American Groups. As of December 31, 2016, the National Group included 84 hospitals, which were located in Alaska, California, Florida, southern Georgia, Idaho, Indiana, northern Kentucky, Nevada, New Hampshire, South Carolina, Utah and Virginia. As of December 31, 2016, the American Group included 80 hospitals, which were located in Colorado, northern Georgia, Kansas, southern Kentucky, Louisiana, Mississippi, Missouri, Oklahoma, Tennessee and Texas. As of December 31, 2016, the Company operated six hospitals in England. The Company owns, manages or operates hospitals, freestanding surgery centers and freestanding emergency care facilities, walk-in clinics, diagnostic and imaging centers, among others.

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