Is Now The Time To Look At Buying Quest Diagnostics Incorporated (NYSE:DGX)?

Let's talk about the popular Quest Diagnostics Incorporated (NYSE:DGX). The company's shares saw a decent share price growth in the teens level on the NYSE over the last few months. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Quest Diagnostics’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Quest Diagnostics

What Is Quest Diagnostics Worth?

Great news for investors – Quest Diagnostics is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Quest Diagnostics’s ratio of 13.3x is below its peer average of 20.08x, which indicates the stock is trading at a lower price compared to the Healthcare industry. Although, there may be another chance to buy again in the future. This is because Quest Diagnostics’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Quest Diagnostics generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -1.8% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Quest Diagnostics. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although DGX is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to DGX, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on DGX for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you'd like to know more about Quest Diagnostics as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 2 warning signs for Quest Diagnostics and you'll want to know about these.

If you are no longer interested in Quest Diagnostics, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.