Surgical Care Affiliates (NASDAQ: SCAI) and Quest Diagnostics (NYSE:DGX) are both healthcare companies, but which is the superior business? We will contrast the two businesses based on the strength of their dividends, earnings, analyst recommendations, institutional ownership, risk, profitability and valuation.

Profitability

This table compares Surgical Care Affiliates and Quest Diagnostics’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Surgical Care Affiliates 21.52% 13.07% 12.83%
Quest Diagnostics 8.82% 15.53% 7.18%

Earnings and Valuation

This table compares Surgical Care Affiliates and Quest Diagnostics’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Surgical Care Affiliates N/A N/A N/A $0.55 101.58
Quest Diagnostics $7.59 billion 1.69 $1.44 billion $4.77 19.66

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

Institutional & Insider Ownership

88.6% of Quest Diagnostics shares are held by institutional investors. 3.3% of Surgical Care Affiliates shares are held by insiders. Comparatively, 1.8% of Quest Diagnostics shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Analyst Recommendations

This is a summary of recent ratings and price targets for Surgical Care Affiliates and Quest Diagnostics, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Surgical Care Affiliates 0 2 0 0 2.00
Quest Diagnostics 1 12 6 0 2.26

Surgical Care Affiliates presently has a consensus price target of $50.00, indicating a potential downside of 10.51%. Quest Diagnostics has a consensus price target of $104.42, indicating a potential upside of 11.34%. Given Quest Diagnostics’ stronger consensus rating and higher possible upside, analysts plainly believe Quest Diagnostics is more favorable than Surgical Care Affiliates.

Volatility and Risk

Surgical Care Affiliates has a beta of 0.58, indicating that its share price is 42% less volatile than the S&P 500. Comparatively, Quest Diagnostics has a beta of 0.66, indicating that its share price is 34% less volatile than the S&P 500.

Dividends

Quest Diagnostics pays an annual dividend of $1.80 per share and has a dividend yield of 1.9%. Surgical Care Affiliates does not pay a dividend. Quest Diagnostics pays out 37.7% of its earnings in the form of a dividend. Surgical Care Affiliates has increased its dividend for 5 consecutive years.

Summary

Quest Diagnostics beats Surgical Care Affiliates on 9 of the 14 factors compared between the two stocks.

About Surgical Care Affiliates

Surgical Care Affiliates, Inc. is a provider of solutions to physicians, health plans and health systems to optimize surgical care. The Company offers tools and systems in the areas of clinical benchmarking, clinical best practices, operating efficiency, care coordination and supply chain management. As of December 31, 2016, the Company operated a network of surgical facilities in the United States, which included 197 ambulatory surgery centers (ASCs) and seven surgical hospitals in partnership with approximately 3,000 physician partners. The Company’s operations consist of its ownership and management of ASCs and surgical hospitals. Its ASCs provide the facilities, equipment, supplies and clinical support staff necessary to provide non-emergency surgical services to patients not requiring hospitalization. Its surgical hospitals allow physicians to perform a range of surgical procedures, including surgeries, and allow patients to stay in the hospital for several nights to recover.

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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