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There's no mystery regarding why Quest Diagnostics (DGX) has a bright future: the United States is on the cusp of historic and civilization-advancing change with Congressional passage of the health care reform bill and its ultimate signature by President Obama, and that means good things diagnostic test services, which is why I'm Reiterating my Buy rating for the company's shares, first recommended on June 25, 2009, at a price of $55.89. Further, diagnostic tests are at the core of health care services, and even though the number of tests per U.S. citizen will likely decline in the years ahead, when one adds 30-45 million more citizens regularly accessing health care services annually, within 10 years, the probability of increased business is high, to say the least.
The First Call FY2009/FY2010 EPS estimates for DGX are $3.86 to $4.18. Further, with a P/E of about 16, the analysis here argues that Quest is undervalued.
Technically, Quest's stock chart is strong -- an uptrend, with only one serious violation of the key, 50-day moving average in the past six months. Further, recently Quest broke through psychological resistance at $60, and now appears to be forming a pennant -- a bullish pattern. According to my analysis, Quest is headed north.
Stock Analysis: Quest Diagnostics is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in DGX now; then buy another 25% in one month, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your DGX position before February 2010. Sell/Stop Loss if you were to buy shares in this company: $32.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
Technically, Quest's stock chart is strong -- an uptrend, with only one serious violation of the key, 50-day moving average in the past six months. Further, recently Quest broke through psychological resistance at $60, and now appears to be forming a pennant -- a bullish pattern. According to my analysis, Quest is headed north.
Stock Analysis: Quest Diagnostics is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in DGX now; then buy another 25% in one month, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your DGX position before February 2010. Sell/Stop Loss if you were to buy shares in this company: $32.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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