Quest Diagnostics’ (DGX) diagnostic information services (or DIS) business accounts for more than 95% of the company’s total revenues. It is characterized by a high volume of relatively low-dollar transactions. Under DIS, Quest provides clinical testing and other services. Major customer groups for DIS include healthcare insurers, government payers, client payers, and patients.
So far in 2018, Quest Diagnostics has made two acquisitions. In February 2018, Quest acquired Mobile Medical Examination Services for a total consideration of $142.0 million. The latter is a leading provider of home-based health risk assessments and related services. In June 2018, Quest Diagnostics acquired Cape Cod Healthcare’s outreach laboratory service business for a consideration of $35.0 million.
In May 2018, Quest Diagnostics entered into a long-term strategic partnership with UnitedHealthcare (UNH). This partnership is focused on creating more personalized care recommendations and a simpler consumer experience for people who are enrolled in UnitedHealthcare plans. Beginning in January 2019, Quest will be a contracted, participating provider of clinical laboratory testing services for all of UnitedHealthcare plans excluding existing lab capitation arrangements across the US.
Quest’s long-term debt-to-equity ratio stands at 0.65. In comparison, the long-term debt-to-equity ratio of peers Illumina (ILMN), Johnson & Johnson (JNJ), and Thermo Fisher Scientific (TMO) stand at 0.22, 0.47, and 0.67, respectively.
We’ll look at Quest Diagnostics’ valuation metrics and analysts’ recommendations in the next part.