Quest Diagnostics (NYSE: DGX) and Surgical Care Affiliates (NASDAQ:SCAI) are both medical companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, analyst recommendations, earnings, profitability, institutional ownership, dividends and risk.

Dividends

Quest Diagnostics pays an annual dividend of $1.80 per share and has a dividend yield of 1.9%. Surgical Care Affiliates does not pay a dividend. Quest Diagnostics pays out 37.7% of its earnings in the form of a dividend. Quest Diagnostics has increased its dividend for 5 consecutive years.

Profitability

This table compares Quest Diagnostics and Surgical Care Affiliates’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Quest Diagnostics 8.82% 15.53% 7.18%
Surgical Care Affiliates 21.52% 13.07% 12.83%

Analyst Recommendations

This is a summary of current recommendations and price targets for Quest Diagnostics and Surgical Care Affiliates, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Quest Diagnostics 1 12 6 0 2.26
Surgical Care Affiliates 0 2 0 0 2.00

Quest Diagnostics presently has a consensus price target of $104.42, indicating a potential upside of 11.41%. Surgical Care Affiliates has a consensus price target of $50.00, indicating a potential upside of Infinity. Given Surgical Care Affiliates’ higher probable upside, analysts clearly believe Surgical Care Affiliates is more favorable than Quest Diagnostics.

Institutional and Insider Ownership

89.0% of Quest Diagnostics shares are held by institutional investors. 1.8% of Quest Diagnostics shares are held by insiders. Comparatively, 3.3% of Surgical Care Affiliates shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Valuation and Earnings

This table compares Quest Diagnostics and Surgical Care Affiliates’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Quest Diagnostics $7.52 billion 1.70 $645.00 million $4.77 19.65
Surgical Care Affiliates N/A N/A N/A $0.86 N/A

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

Summary

Quest Diagnostics beats Surgical Care Affiliates on 8 of the 13 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.

Surgical Care Affiliates Company Profile

Surgical Care Affiliates, Inc. is a provider of solutions to physicians, health plans and health systems to optimize surgical care. The Company offers tools and systems in the areas of clinical benchmarking, clinical best practices, operating efficiency, care coordination and supply chain management. As of December 31, 2016, the Company operated a network of surgical facilities in the United States, which included 197 ambulatory surgery centers (ASCs) and seven surgical hospitals in partnership with approximately 3,000 physician partners. The Company’s operations consist of its ownership and management of ASCs and surgical hospitals. Its ASCs provide the facilities, equipment, supplies and clinical support staff necessary to provide non-emergency surgical services to patients not requiring hospitalization. Its surgical hospitals allow physicians to perform a range of surgical procedures, including surgeries, and allow patients to stay in the hospital for several nights to recover.

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