Contrasting Quest Diagnostics (NYSE:DGX) and HealthStream (HSTM)

Quest Diagnostics (NYSE: DGX) and HealthStream (NASDAQ:HSTM) are both medical companies, but which is the better investment? We will contrast the two companies based on the strength of their analyst recommendations, risk, institutional ownership, dividends, profitabiliy, earnings and valuation.

Volatility and Risk

Quest Diagnostics has a beta of 0.7, meaning that its stock price is 30% less volatile than the S&P 500. Comparatively, HealthStream has a beta of 1, meaning that its stock price has a similar volatility profile to the S&P 500.

Valuation and Earnings

This table compares Quest Diagnostics and HealthStream’s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	EBITDA	Earnings Per Share	Price/Earnings Ratio
Quest Diagnostics	$7.55 billion	1.98	$1.42 billion	$4.96	22.08
HealthStream	$231.77 million	3.13	$21.62 million	$0.14	162.36

Quest Diagnostics has higher revenue and earnings than HealthStream. Quest Diagnostics is trading at a lower price-to-earnings ratio than HealthStream, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Quest Diagnostics and HealthStream’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Quest Diagnostics	9.28%	15.66%	7.24%
HealthStream	1.85%	2.27%	1.65%

Analyst Ratings

This is a summary of recent ratings and target prices for Quest Diagnostics and HealthStream, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Quest Diagnostics	0	7	6	1	2.57
HealthStream	0	3	4	0	2.57

Quest Diagnostics presently has a consensus price target of $109.11, indicating a potential downside of 0.37%. HealthStream has a consensus price target of $26.00, indicating a potential upside of 14.39%. Given HealthStream’s higher probable upside, analysts clearly believe HealthStream is more favorable than Quest Diagnostics.

Dividends

Quest Diagnostics pays an annual dividend of $1.80 per share and has a dividend yield of 1.6%. HealthStream does not pay a dividend. Quest Diagnostics pays out 36.3% of its earnings in the form of a dividend. Quest Diagnostics has raised its dividend for 5 consecutive years.

Institutional and Insider Ownership

90.8% of Quest Diagnostics shares are owned by institutional investors. Comparatively, 77.0% of HealthStream shares are owned by institutional investors. 1.5% of Quest Diagnostics shares are owned by insiders. Comparatively, 21.1% of HealthStream shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Summary

Quest Diagnostics beats HealthStream on 11 of the 17 factors compared between the two stocks.

Quest Diagnostics Company Profile

Quest Diagnostics Incorporated is a provider of diagnostic information services. The Company operates through two businesses: Diagnostic Information Services and Diagnostic Solutions. The Diagnostic Information Services business develops and delivers diagnostic testing information and services, providing insights that empower and enable a range of customers, including patients, clinicians, hospitals, integrated delivery networks (IDNs), health plans, employers and accountable care organizations (ACOs). Its Diagnostic Solutions group includes its risk assessment services business, which offers solutions for insurers, and its healthcare information technology businesses, which offers solutions for healthcare providers. The Company’s services are provided under the Quest Diagnostics brand, but it also provides services under other brands, including AmeriPath, Dermpath Diagnostics, Focus Diagnostics, Athena Diagnostics, ExamOne, Quanum and Care360.

HealthStream Company Profile

HealthStream, Inc. (HealthStream) provides workforce, patient experience and provider solutions for healthcare organizations. The Company operates in three segments: HealthStream Workforce Solutions, HealthStream Patient Experience Solutions and HealthStream Provider Solutions. HealthStream’s products and services are organized into three segments: Workforce Solutions, Patient Experience Solutions, and Provider Solutions. HealthStream’s solutions are provided to a range of customers within the healthcare industry across the continuum of care. Delivered primarily as Software-as-a-Service (SaaS), the Company’s solutions focus on challenges facing the healthcare workforce and healthcare organizations, including the need to manage, retain, engage and develop healthcare workforce talent; meet compliance requirements; manage ongoing medical staff credentialing and privileging processes, and deliver patient experiences of care in healthcare organizations.