Let's talk about the popular Quest Diagnostics Incorporated (NYSE:DGX). The company's shares saw its share price hover around a small range of $95.91 to $103.97 over the last few weeks. But is this actually reflective of the share value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Quest Diagnostics’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's the opportunity in Quest Diagnostics?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 13.94% above my intrinsic value, which means if you buy Quest Diagnostics today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is $89.83, then there isn’t really any room for the share price grow beyond what it’s currently trading. In addition to this, Quest Diagnostics has a low beta, which suggests its share price is less volatile than the wider market.
Can we expect growth from Quest Diagnostics?
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. Quest Diagnostics’s earnings over the next few years are expected to increase by 24%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has already priced in DGX’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on DGX, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Quest Diagnostics. You can find everything you need to know about Quest Diagnostics in the latest infographic research report. If you are no longer interested in Quest Diagnostics, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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 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.