Will Quest Diagnostics Stock Rebound After A Large 19% Fall In A Month?

The stock price of Quest Diagnostics (NYSE: DGX), one of the largest U.S. diagnostics chains, has seen a fall of 15% over the last twenty-one trading days, while it is up 5% over the last week. The recent fall came despite the company’s preliminary results that were comfortably above the street estimates. The company estimates its top-line to be down 9% y-o-y to $2.74 billion in Q4 21, compared to the $2.6 billion consensus estimate. Similarly, Quest expects its adjusted earnings to be $3.33, comfortably above the $3.19 consensus estimate.

It appears that investors were hoping for even better numbers given the spread of Omicron in December, which should have triggered an increase in Covid-19 testing. Furthermore, the company’s guidance for 2022 appears to be lower than what investors were anticipating. The company has  reaffirmed its earlier guidance of revenue to be north of $8.5 billion and EPS to exceed $8.00. However, both these figures are well below the consensus estimates of $9.2 billion in revenue and $8.75 EPS. 

But now that DGX stock has seen a large 19% fall over the last month or so, will it continue its downward trajectory, or is a rise imminent? Going by historical performance, there is a very strong chance of a rise in DGX stock over the next month. A fall of 19% in a month is a rare event for DGX stock and it has occurred only 17 times in last ten years. Out of those 17 instances, all 17 of them resulted in DGX stock rising over the subsequent one-month period (twenty-one trading days). This historical pattern reflects a very strong chance of a rise in DGX stock over the coming month. See our analysis on Quest Diagnostics Stock Chance of Rise for more details.

While DGX stock may see higher levels over the next month, it is helpful to see how its peers stack up. Check out Quest Diagnostics Stock Comparison With Peers to see how DGX stock compares against peers on metrics that matter. You can find more such useful comparisons on Peer Comparisons.

Calculation of ‘Event Probability‘ and ‘Chance of Rise‘ using last ten years data

  • After moving -13.0% or more over a five-day period, the stock rose in the next five days on 38% of the occasions.
  • After moving -15.5% or more over a ten-day period, the stock rose in the next ten days on 40% of the occasions
  • After moving -19.2% or more over a twenty-one-day period, the stock rose in the next twenty-one days on 100% of the occasions.

This pattern suggests that there is a very high chance of a rise in DGX stock over the next one month, but it may continue to see lower levels for the next five days and ten days.

Quest Diagnostics (DGX) Stock Return (Recent) Comparison With Peers

  • Five-Day Return: NEO highest at 20.7%; DGX lowest at -13.0%
  • Ten-Day Return: HCA highest at -2.1%; DGX lowest at -15.5%
  • Twenty-One Day Return: DVA highest at 6.1%; DGX lowest at -19.2%

We estimate Quest Diagnostics Valuation to be around $140 per share which is in-line with the current market price. This represents a P/EBITDA multiple of under 6x for the company based on our Quest Diagnostics EBITDA for the current fiscal year.

While DGX stock may see higher levels, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Eli Lilly vs. Qorvo

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.

 ReturnsJan 2022
MTD [1]
YTD [1]
Total [2]
 DGX Return-20%-20%51%
 S&P 500 Return-4%-4%105%
 Trefis MS Portfolio Return-9%-9%257%

[1] Month-to-date and year-to-date as of 1/19/2022
[2] Cumulative total returns since the end of 2016

Market Beating Portfolios
Price Estimates

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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