Fresenius Medical Care Corporation (NYSE: FMS) and Quest Diagnostics (NYSE:DGX) are both large-cap medical companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitability, dividends, valuation, analyst recommendations, earnings, risk and institutional ownership.

Insider and Institutional Ownership

2.6% of Fresenius Medical Care Corporation shares are owned by institutional investors. Comparatively, 87.1% of Quest Diagnostics shares are owned by institutional investors. 1.8% of Quest Diagnostics shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Earnings & Valuation

This table compares Fresenius Medical Care Corporation and Quest Diagnostics’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Fresenius Medical Care Corporation $20.61 billion 1.43 $3.76 billion $2.18 22.07
Quest Diagnostics $7.59 billion 1.84 $1.44 billion $4.96 20.59

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

Analyst Recommendations

This is a breakdown of current ratings and target prices for Fresenius Medical Care Corporation and Quest Diagnostics, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Fresenius Medical Care Corporation 0 3 6 0 2.67
Quest Diagnostics 1 7 5 1 2.43

Fresenius Medical Care Corporation presently has a consensus target price of $46.00, suggesting a potential downside of 4.39%. Quest Diagnostics has a consensus target price of $109.54, suggesting a potential upside of 7.27%. Given Quest Diagnostics’ higher probable upside, analysts plainly believe Quest Diagnostics is more favorable than Fresenius Medical Care Corporation.

Profitability

This table compares Fresenius Medical Care Corporation and Quest Diagnostics’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Fresenius Medical Care Corporation 7.06% 11.57% 4.97%
Quest Diagnostics 9.28% 15.66% 7.24%

Volatility and Risk

Fresenius Medical Care Corporation has a beta of 0.48, meaning that its share price is 52% less volatile than the S&P 500. Comparatively, Quest Diagnostics has a beta of 0.69, meaning that its share price is 31% less volatile than the S&P 500.

Dividends

Fresenius Medical Care Corporation pays an annual dividend of $0.37 per share and has a dividend yield of 0.8%. Quest Diagnostics pays an annual dividend of $1.80 per share and has a dividend yield of 1.8%. Fresenius Medical Care Corporation pays out 17.0% of its earnings in the form of a dividend. Quest Diagnostics pays out 36.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Quest Diagnostics has raised its dividend for 5 consecutive years. Quest Diagnostics is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Quest Diagnostics beats Fresenius Medical Care Corporation on 12 of the 18 factors compared between the two stocks.

About Fresenius Medical Care Corporation

Fresenius Medical Care AG & Co. KGaA is a kidney dialysis company. The Company provides dialysis care and related services to persons suffering from end-stage renal disease (ESRD), as well as other healthcare services. The Company’s segments include North America Segment, the Europe, Middle East and Africa (EMEA) Segment, the Asia-Pacific Segment and the Latin America Segment. The Company develops and manufactures a range of dialysis machines, systems and disposable products. As of December 31, 2016, the Company sold its products to customers in more than 120 countries and also used in its internal healthcare service operations. The Company’s Care Coordination services include coordinated delivery of pharmacy services, vascular, cardiovascular and endovascular specialty services, non-dialysis laboratory testing services, physician services, hospitalist and intensivist services, health plan services, ambulatory surgery center services and urgent care services.

About Quest Diagnostics

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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