Tenet Healthcare Corporation (NYSE: THC) and Quest Diagnostics (NYSE:DGX) are both medical companies, but which is the better investment? We will compare the two businesses based on the strength of their dividends, risk, valuation, analyst recommendations, earnings, institutional ownership and profitability.

Dividends

Quest Diagnostics pays an annual dividend of $1.80 per share and has a dividend yield of 2.0%. Tenet Healthcare Corporation does not pay a dividend. Quest Diagnostics pays out 36.3% of its earnings in the form of a dividend. Tenet Healthcare Corporation has raised its dividend for 5 consecutive years.

Analyst Ratings

This is a summary of current ratings and recommmendations for Tenet Healthcare Corporation and Quest Diagnostics, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Tenet Healthcare Corporation 0 9 5 0 2.36
Quest Diagnostics 1 8 6 0 2.33

Tenet Healthcare Corporation presently has a consensus price target of $20.75, suggesting a potential upside of 57.79%. Quest Diagnostics has a consensus price target of $107.37, suggesting a potential upside of 17.91%. Given Tenet Healthcare Corporation’s stronger consensus rating and higher possible upside, equities research analysts plainly believe Tenet Healthcare Corporation is more favorable than Quest Diagnostics.

Insider and Institutional Ownership

87.1% of Quest Diagnostics shares are owned by institutional investors. 3.1% of Tenet Healthcare Corporation shares are owned by company insiders. Comparatively, 1.8% of Quest Diagnostics shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Risk and Volatility

Tenet Healthcare Corporation has a beta of 1.2, suggesting that its share price is 20% more volatile than the S&P 500. Comparatively, Quest Diagnostics has a beta of 0.65, suggesting that its share price is 35% less volatile than the S&P 500.

Profitability

This table compares Tenet Healthcare Corporation and Quest Diagnostics’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Tenet Healthcare Corporation -0.97% -2.00% -0.09%
Quest Diagnostics 9.28% 15.66% 7.24%

Valuation & Earnings

This table compares Tenet Healthcare Corporation and Quest Diagnostics’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Tenet Healthcare Corporation $19.32 billion 0.07 $2.07 billion ($1.95) -6.74
Quest Diagnostics $7.59 billion 1.64 $1.44 billion $4.96 18.36

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

Tenet Healthcare Corporation Company Profile

Tenet Healthcare Corporation (Tenet) is a healthcare services company. The Company operates regionally focused, integrated healthcare delivery networks in large urban and suburban markets in the United States. The Company’s segments include Hospital Operations and Other, Ambulatory Care and Conifer. As of December 31, 2016, its subsidiaries operated 79 hospitals, including three academic medical centers, two children’s hospitals, two specialty hospitals and one critical access hospital. The Company’s Ambulatory Care segment includes the operations of its USPI joint venture and its Aspen facilities. As of December 31, 2016, Conifer provided one or more of the business process services described above from 20 service centers to more than 800 Tenet and non-Tenet hospital and other clients in over 40 states. As of December 31, 2016, the Company operated 20 short-stay surgical hospitals, over 470 outpatient centers, and nine facilities in the United Kingdom.

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.

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