DGX

We rate QUEST DIAGNOSTICS INC (DGX) as a Hold with a composite score of 58.5/100 at a current price of $209.52. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in stability (93th percentile) and momentum (75th percentile), which together account for the majority of the composite score. All factors score above the 40th percentile, indicating no material weakness in the quantitative profile. We assign a No Moat rating (34/100), Medium uncertainty, and Standard capital allocation.

Key items to watch: balance sheet deleveraging progress. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

QUEST DIAGNOSTICS INC holds a top-quartile position (#0 of 50) within the Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 58.5/100 places it at rank #842 in our full 7,333-stock universe. With a $21.2B market capitalization, QUEST DIAGNOSTICS INC operates at meaningful scale within the Services sector, providing competitive advantages in distribution, procurement, and customer reach.

The near-term outlook is constructive, with revenue growing at 17% and momentum in the 75th percentile confirming positive market sentiment and institutional accumulation. The combination of strong top-line growth and favorable price dynamics suggests the company is executing well on its growth strategy. Investment factor at the 41th percentile indicates reinvestment patterns that investors should monitor for sustainability.

The margin cascade tells an important story: gross margins of 33% (-26.3pp vs sector) narrow to operating margins of 14% (+10.5pp vs sector) and net margins of 9.6%, yielding a gross-to-net conversion rate of 29%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $209.52, QUEST DIAGNOSTICS INC is trading near fair value based on current fundamentals. Our value factor score of 65/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 21.7x (roughly in line with the sector median of 23.7x), EV/EBITDA of 14.9x (at a premium), P/B of 3.1x, P/S of 2.1x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Medium uncertainty rating to QUEST DIAGNOSTICS INC. The stock presents a balanced risk profile: significant leverage (122% debt-to-equity) and low beta of 0.21 — while defensive, this may indicate limited upside participation in bull markets. While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: significant leverage (122% debt-to-equity); low beta of 0.21 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 93th percentile and quality factor at the 47th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: above-average stability (93th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate QUEST DIAGNOSTICS INC's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 14.1%, and the balance sheet is managed within acceptable parameters (D/E: 122%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; QUEST DIAGNOSTICS INC falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 1.63% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, QUEST DIAGNOSTICS INC receives a Hold rating with a composite score of 58.5/100 (rank #842 of 7,333). Our quantitative framework assigns a No Moat (34/100, trend: stable), Medium uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 64/100.

Our analysis supports a neutral stance on QUEST DIAGNOSTICS INC. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.