Quest Diagnostics (NYSE: DGX) and Tenet Healthcare Corporation (NYSE:THC) are both medical companies, but which is the better investment? We will contrast the two businesses based on the strength of their dividends, profitability, risk, earnings, analyst recommendations, institutional ownership and valuation.

Earnings and Valuation

This table compares Quest Diagnostics and Tenet Healthcare Corporation’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Quest Diagnostics $7.59 billion 1.67 $1.44 billion $4.96 18.74
Tenet Healthcare Corporation $19.32 billion 0.08 $2.07 billion ($1.95) -8.05

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

Institutional & Insider Ownership

87.1% of Quest Diagnostics shares are held by institutional investors. 1.8% of Quest Diagnostics shares are held by company insiders. Comparatively, 3.1% of Tenet Healthcare Corporation shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock 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%. Tenet Healthcare 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.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Quest Diagnostics and Tenet Healthcare Corporation, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Quest Diagnostics 1 7 5 1 2.43
Tenet Healthcare Corporation 0 9 5 0 2.36

Quest Diagnostics presently has a consensus target price of $108.75, indicating a potential upside of 16.99%. Tenet Healthcare Corporation has a consensus target price of $20.75, indicating a potential upside of 32.25%. Given Tenet Healthcare Corporation’s higher possible upside, analysts plainly believe Tenet Healthcare Corporation is more favorable than Quest Diagnostics.

Profitability

This table compares Quest Diagnostics and Tenet Healthcare Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Quest Diagnostics 9.28% 15.66% 7.24%
Tenet Healthcare Corporation -0.97% -2.00% -0.09%

Volatility and Risk

Quest Diagnostics has a beta of 0.65, suggesting that its share price is 35% less volatile than the S&P 500. Comparatively, Tenet Healthcare Corporation has a beta of 1.2, suggesting that its share price is 20% more volatile than the S&P 500.

Summary

Quest Diagnostics beats Tenet Healthcare Corporation on 10 of the 16 factors compared between the two stocks.

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.

About Tenet Healthcare Corporation

Tenet Healthcare Corporation (Tenet) is a healthcare services company. The Company operates regionally focused, integrated healthcare delivery networks in large urban and suburban markets in the United States. The Company’s segments include Hospital Operations and Other, Ambulatory Care and Conifer. As of December 31, 2016, its subsidiaries operated 79 hospitals, including three academic medical centers, two children’s hospitals, two specialty hospitals and one critical access hospital. The Company’s Ambulatory Care segment includes the operations of its USPI joint venture and its Aspen facilities. As of December 31, 2016, Conifer provided one or more of the business process services described above from 20 service centers to more than 800 Tenet and non-Tenet hospital and other clients in over 40 states. As of December 31, 2016, the Company operated 20 short-stay surgical hospitals, over 470 outpatient centers, and nine facilities in the United Kingdom.

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