Quest Diagnostics Incorporated (NYSE:DGX): Immense Growth Potential?

Looking at Quest Diagnostics Incorporated’s (NYSE:DGX) earnings update on 31 December 2018, it seems that analyst expectations are fairly bearish, with profits predicted to rise by 2.2% next year against the higher past 5-year average growth rate of 3.5%. Currently with trailing-twelve-month earnings of US$733m, we can expect this to reach US$749m by 2020. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Quest Diagnostics in the longer term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

Check out our latest analysis for Quest Diagnostics

Exciting times ahead?

The longer term view from the 19 analysts covering DGX is one of positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To understand the overall trajectory of DGX’s earnings growth over these next fews years, I’ve fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.

NYSE:DGX Past and Future Earnings, March 16th 2019
NYSE:DGX Past and Future Earnings, March 16th 2019

From the current net income level of US$733m and the final forecast of US$841m by 2022, the annual rate of growth for DGX’s earnings is 4.9%. This leads to an EPS of $6.32 in the final year of projections relative to the current EPS of $5.39. With a current profit margin of 9.7%, this movement will result in a margin of 10% by 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Quest Diagnostics, there are three pertinent aspects you should further examine:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is Quest Diagnostics worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Quest Diagnostics is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Quest Diagnostics? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.