Today I will take a look at Quest Diagnostics Incorporated's (NYSE:DGX) most recent earnings update (30 September 2019) and compare these latest figures against its performance over the past few years, as well as how the rest of the healthcare industry performed. As an investor, I find it beneficial to assess DGX’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.
Was DGX's recent earnings decline indicative of a tough track record?
DGX's trailing twelve-month earnings (from 30 September 2019) of US$709m has declined by -18% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 6.3%, indicating the rate at which DGX is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s occurring with margins and if the whole industry is feeling the heat.
In terms of returns from investment, Quest Diagnostics has fallen short of achieving a 20% return on equity (ROE), recording 13% instead. However, its return on assets (ROA) of 7.4% exceeds the US Healthcare industry of 6.0%, indicating Quest Diagnostics has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Quest Diagnostics’s debt level, has declined over the past 3 years from 14% to 12%.
What does this mean?
Quest Diagnostics's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors impacting its business. I suggest you continue to research Quest Diagnostics to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for DGX’s future growth? Take a look at our free research report of analyst consensus for DGX’s outlook.
- Financial Health: Are DGX’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 30 September 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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