The latest earnings update Quest Diagnostics Incorporated (NYSE:DGX) released in December 2018 indicated that the company experienced a slight headwind with earnings deteriorating from US$769m to US$733m, a change of -4.7%. Below, I’ve presented key growth figures on how market analysts perceive Quest Diagnostics’s earnings growth outlook over the next few years and whether the future looks brighter. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.
Market analysts’ consensus outlook for this coming year seems rather subdued, with earnings increasing by a single digit 2.2%. The growth outlook in the following year seems much more positive with rates arriving at double digit 10% compared to today’s earnings, and finally hitting US$838m by 2022.
Although it is informative understanding the rate of growth year by year relative to today’s figure, it may be more insightful evaluating the rate at which the business is rising or falling every year, on average. The benefit of this approach is that we can get a better picture of the direction of Quest Diagnostics’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I’ve appended a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 4.7%. This means, we can presume Quest Diagnostics will grow its earnings by 4.7% every year for the next couple of years.
For Quest Diagnostics, there are three essential factors you should further examine:
- 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.
- Valuation: What is DGX 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 DGX is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of DGX? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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.