Quest Diagnostics (DGX) Soars to 52-Week High, Time to Cash Out?

Have you been paying attention to shares of Quest Diagnostics (DGX)? Shares have been on the move with the stock up 11.3% over the past month. The stock hit a new 52-week high of $125.32 in the previous session. Quest Diagnostics has gained 15.8% since the start of the year compared to the 1.5% move for the Zacks Medical sector and the 3.3% return for the Zacks Medical - Outpatient and Home Healthcare industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on April 22, 2020, Quest Diagnostics reported EPS of $0.94 versus consensus estimate of $0.83 while it beat the consensus revenue estimate by 4.64%.

For the current fiscal year, Quest Diagnostics is expected to post earnings of $6.39 per share on $8.01 billion in revenues. This represents a -2.59% change in EPS on a 3.67% change in revenues. For the next fiscal year, the company is expected to earn $7.99 per share on $8.29 billion in revenues. This represents a year-over-year change of 25.17% and 3.47%, respectively.

Valuation Metrics

Quest Diagnostics may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Quest Diagnostics has a Value Score of B. The stock's Growth and Momentum Scores are C and A, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 19.4X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 13.6X versus its peer group's average of 13.1X. Additionally, the stock has a PEG ratio of 1.47. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Quest Diagnostics currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Quest Diagnostics meets the list of requirements. Thus, it seems as though Quest Diagnostics shares could still be poised for more gains ahead.

How Does Quest Diagnostics Stack Up to the Competition?

Shares of Quest Diagnostics have been rising, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also solid potential picks, including Addus HomeCare (ADUS), Molina Healthcare (MOH), and Anthem (ANTM), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.

The Zacks Industry Rank is in the top 41% of all the industries we have in our universe, so it looks like there are some nice tailwinds for Quest Diagnostics, even beyond its own solid fundamental situation.

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Anthem, Inc. (ANTM): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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