Quest Diagnostics (NYSE: DGX) and Universal Health Services (NYSE:UHS) are both large-cap healthcare companies, but which is the superior stock? We will compare the two businesses based on the strength of their institutional ownership, profitability, dividends, earnings, analyst recommendations, valuation and risk.
Insider & Institutional Ownership
88.7% of Quest Diagnostics shares are held by institutional investors. Comparatively, 87.6% of Universal Health Services shares are held by institutional investors. 1.8% of Quest Diagnostics shares are held by insiders. Comparatively, 13.2% of Universal Health Services shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.
This is a summary of recent recommendations for Quest Diagnostics and Universal Health Services, as provided by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Universal Health Services||0||3||11||0||2.79|
Quest Diagnostics presently has a consensus target price of $107.50, indicating a potential upside of 2.42%. Universal Health Services has a consensus target price of $133.29, indicating a potential upside of 8.13%. Given Universal Health Services’ stronger consensus rating and higher possible upside, analysts clearly believe Universal Health Services is more favorable than Quest Diagnostics.
Earnings and Valuation
This table compares Quest Diagnostics and Universal Health Services’ top-line revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Quest Diagnostics||$7.71 billion||1.85||$772.00 million||$4.73||22.19|
|Universal Health Services||$10.41 billion||1.12||$752.30 million||$7.81||15.78|
Quest Diagnostics has higher earnings, but lower revenue than Universal Health Services. Universal Health Services is trading at a lower price-to-earnings ratio than Quest Diagnostics, indicating that it is currently the more affordable of the two stocks.
Quest Diagnostics pays an annual dividend of $1.80 per share and has a dividend yield of 1.7%. Universal Health Services pays an annual dividend of $0.40 per share and has a dividend yield of 0.3%. Quest Diagnostics pays out 38.1% of its earnings in the form of a dividend. Universal Health Services pays out 5.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Quest Diagnostics has increased its dividend for 6 consecutive years. Quest Diagnostics is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Risk & Volatility
Quest Diagnostics has a beta of 0.68, indicating that its share price is 32% less volatile than the S&P 500. Comparatively, Universal Health Services has a beta of 0.92, indicating that its share price is 8% less volatile than the S&P 500.
This table compares Quest Diagnostics and Universal Health Services’ net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Universal Health Services||7.23%||15.06%||6.98%|
Quest Diagnostics beats Universal Health Services on 9 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.
Universal Health Services Company Profile
Universal Health Services, Inc. is a holding company. The Company’s principal business is owning and operating, through its subsidiaries, acute care hospitals and outpatient facilities, and behavioral healthcare facilities. The Company’s segments include Acute Care Hospital Services, Behavioral Health Services and Other. As of February 28, 2017, the Company owned and/or operated 319 inpatient facilities, and 33 outpatient and other facilities, located in 37 states, Washington, District of Columbia, the United Kingdom, Puerto Rico and the United States Virgin Islands. The Company’s hospitals provide a range of services, such as oncology, diagnostic care, coronary care, pediatric services, pharmacy services and/or behavioral health services. As of February 28, 2017, its acute care facilities located in the United States included 26 inpatient acute care hospitals; four free-standing emergency departments, and four outpatient surgery/cancer care centers and one surgical hospital.
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