Quest (DGX): On the comeback trail?

Is it time to jump back into Quest Diagnostics (NYSE: DGX)?

Quest Diagnostics, which provides laboratory services to roughly 50% of the nation's doctors and hospitals, fell out of favor after it lost a large client, amid building price pressure.

Slowing growth, and an above-average sector valuation also were data points offered by those making the bearish case.

The bullish case, on the other hand, argues that Quest's recent cost cutting initiatives, strong cash flow, and growing demand for sophisticated medical tests (bolstered by that old standby, the aging Baby Boomer generation) suggest solid long-term growth prospects for DGX. Quest is trading around $55 with a P/E of 19.

(Note: Technical analysis agnostics stop reading here. All others, continue.)

From a technical analysis standpoint, Quest's chart appears to have formed a double-bottom around $47.90 in March/April and May/June.

Investment Category: Quest is a moderate-risk stock not suitable for low-risk investors. The Reuters 2007 and 2008 earnings per share consensus estimates for DGX are $2.87 and $3.25, respectively.