Is Quest Diagnostics (DGX) Stock Undervalued Right Now?
Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.
Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.
One company to watch right now is Quest Diagnostics (DGX). DGX is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with a P/E ratio of 18.57, which compares to its industry's average of 26.68. Over the past year, DGX's Forward P/E has been as high as 20.51 and as low as 11.34, with a median of 15.46.
Another notable valuation metric for DGX is its P/B ratio of 2.86. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 2.99. Over the past year, DGX's P/B has been as high as 3.27 and as low as 2.20, with a median of 2.52.
Finally, our model also underscores that DGX has a P/CF ratio of 11.17. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. DGX's current P/CF looks attractive when compared to its industry's average P/CF of 29.84. Over the past year, DGX's P/CF has been as high as 11.17 and as low as 6.70, with a median of 7.82.
These are only a few of the key metrics included in Quest Diagnostics's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, DGX looks like an impressive value stock at the moment.
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