Quest

Diagnostics
(NYSE) DGX
PGN Stock Pitch
Andri Mytfari, Abhi Tadikonda, Teagan Janssen, Priyanka Tomar

PRICE: $121.87
TARGET: $141.38
How It Works...

Company Industry Thesis Valuation Risks 2

Company Overview

History: Summary Financials:

❏ Provides 48 unique health tests ❏ 52 Week Range: $73.02-

❏ Founded in 1967 $134.71
❏ Paul A. Brown ❏ Market Cap: $16.264B
❏ CEO: Steve Rusckowski ❏ EPS: $10.47
❏ Headquartered in Secaucus, NJ ❏ P/E Ratio: 11.78x
❏ Ticker Symbol: DGX ❏ EBITDA: $2.332 B (2020)
Products and Services:

Company
Company Industry
Industry Thesis
Thesis Valuation
Valuation Risks
Risks 3
Company Overview
New M&A and Stock Performance vs. S&P 500

● SmithKline Beecham
Clinical Laboratories
(SBCL) merger
○ Huge opportunity
for growth
○ Projected to be
largest clinical
laboratory in the
world

Company
Company Industry
Industry Thesis
Thesis Valuation
Valuation Risks
Risks 4
Quest Diagnostics: Competitive Advantage

Quest Diagnostics “Touches the lives of 30 percent of American adults each year” and
“Serves about half of the physicians and hospitals in the U.S”

Accessibility Testing Diversity Efficiency

6,600+ patient access Tests do not
48 at-home
points, the most
Quest compatible require doctor’s
extensive network in
Diagnostics tests prescription
the U.S.

5 at-home Various COVID

LabCorp 2050 patient service related tests require
centers compatible
tests a doctor’s
prescription
5
Industry Overview: Consumer Testing
Overall growth in consumer accessibility and popularity
Market Overview Market Consumer Trends:
❏
Global Market (2020)- $200.3 billion
❏
US - 40% of global market
❏
Compound annual growth rate (CAGR) of 4.7% ❏ Increased accessibility and affordability
from 2021 to 2028
❏
Market: competitive and fragmented, but Quest is a major ❏ Consumerization: consumers engaged in and
player taking responsibility for their healthcare
❏
Over 250 companies providing home-testing kits : Health,
forensics, ancestry, paternity ❏ Covid-19 Impacts: increased demand for all
❏
Quest Diagnostics is a major player types of testing
❏
Serves 33% adult Americans ❏ Increased dependence and trust of telehealth
❏
Serves 50% of physicians and hospitals in the United States
❏ Awareness of the power, accessibility, and
ease of testing

Company Industry Thesis Valuation Risks 6

Investment Thesis

Quest Diagnostics is a strong financial investment with large growth

potential as it will continue to leverage its testing diversity, and in the
future, capitalize on the growing consumer demand by expanding globally.

Company Industry Thesis Valuation Risks 7

Investment Thesis

Rapidly growing industry alongside strong historical company financials

Company Industry Thesis Valuation Risks 8

Valuation
Industry Comparables

Company Industry Thesis Valuation Risks 9

Valuation
DCF

Company Industry Thesis Valuation Risks 10

Valuation
Exit Multiples and Perpetuity Growth

Company Industry Thesis Valuation Risks 11

Risks/Mitigants

Risks Mitigants
❏ Concerns for personal medical data ❏ Uses technical, administrative and
being sold and distributed to physical safeguards to secure patient
pharmaceutical companies data and protect it against misuse, loss
or alteration.

❏ For at-home tests, consumers may fail

to obtain a sample in the correct ❏ Quest Diagnostics provides detailed
manner resulting in incorrect or instructions and videos on how to
delayed results. obtain all types of samples ranging
from nasal swabs to hair strands.
Additionally, on-call specialists are
❏ Sharing of DNA inherently involves available to aid in sample collection.
exposing sensitive personal
information about one’s family ❏ Takes steps to de-identify or anonymize
members, who may not have provided patient data in accordance with
consent. applicable laws, leaving no ability for
the data to be traced back to the
consumer.

Company Industry Thesis Valuation Risks 12

Recommendation: Buy Quest Stock
Reasons

We recommend a long position on Quest Diagnostics with a price target of $141.38 which
is an upside of 16.0%.
❏ Consumer testing has seen growth for the past decade, and exponential growth as a
result of Covid-19
❏ In the aftermath of Covid-19, consumer awareness and dependence on testing has
increased, which will positively impact all types of medical testing
❏ Quest is one of the most prominent players in the consumer testing industry, offering a
diverse range of medical testing, and reaping the benefits of the growing market
❏ Quest is currently expanding their efforts globally which will likely increase profits
and improve their brand image

13
Works Cited

https://www.globenewswire.com/news-release/2019/08/28/1907833/0/en/Global-Home-Diagnostics-Market-is-Expected-To-Re
ach-USD-6-53-Billion-by-2025-Fior-Markets.html

https://www.questdiagnostics.com/home/about/

https://www.labcorp.com/about-us#:~:text=A%20Global%20Leader%20in%20Drug,the%20drugs%20we%20help%20develop.

https://www.mbaskool.com/brandguide/pharmaceuticals-and-healthcare/14045-quest-diagnostics.html

https://www.modernhealthcare.com/article/20160412/NEWS/160419982/quest-labcorp-forge-divergent-paths-through-m-a

https://finance.yahoo.com/news/quest-diagnostics-updates-strategic-growth-114500393.html?guccounter=1

https://www.sec.gov/ix?doc=/Archives/edgar/data/1022079/000102207921000029/dgx-20201231.htm#i17586f5c1
918467f84e9d79a5a08b3e4_13

https://www.darkintelligencegroup.com/the-dark-report/clinical-laboratory/quest-to-pay-1-27-billion-to-buy-sbs-lab-
division/#:~:text=Quest%20Diagnostics%20Incorporated%20will%20acquire,with%20revenues%20of%20%243%
14
20billion