Kindred Healthcare (NYSE: KND) and Quest Diagnostics (NYSE:DGX) are both medical companies, but which is the superior business? We will contrast the two businesses based on the strength of their earnings, valuation, profitability, analyst recommendations, dividends, institutional ownership and risk.

Risk and Volatility

Kindred Healthcare has a beta of 1.12, suggesting that its stock price is 12% more volatile than the S&P 500. Comparatively, Quest Diagnostics has a beta of 0.59, suggesting that its stock price is 41% less volatile than the S&P 500.

Institutional and Insider Ownership

87.1% of Kindred Healthcare shares are owned by institutional investors. Comparatively, 88.2% of Quest Diagnostics shares are owned by institutional investors. 3.0% of Kindred Healthcare shares are owned by insiders. Comparatively, 1.8% of Quest Diagnostics shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Kindred Healthcare and Quest Diagnostics, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Kindred Healthcare 1 3 1 0 2.00
Quest Diagnostics 1 12 6 0 2.26

Kindred Healthcare presently has a consensus price target of $8.90, suggesting a potential upside of 17.11%. Quest Diagnostics has a consensus price target of $104.42, suggesting a potential upside of 13.50%. Given Kindred Healthcare’s higher probable upside, equities analysts plainly believe Kindred Healthcare is more favorable than Quest Diagnostics.

Earnings and Valuation

This table compares Kindred Healthcare and Quest Diagnostics’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Kindred Healthcare $7.22 billion 0.09 -$664.23 million ($6.02) -1.26
Quest Diagnostics $7.52 billion 1.67 $645.00 million $4.77 19.29

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

Dividends

Kindred Healthcare pays an annual dividend of $0.24 per share and has a dividend yield of 3.2%. Quest Diagnostics pays an annual dividend of $1.80 per share and has a dividend yield of 2.0%. Kindred Healthcare pays out -4.0% of its earnings in the form of a dividend. Quest Diagnostics pays out 37.7% 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. Kindred Healthcare has increased its dividend for 5 consecutive years. Kindred Healthcare is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

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

Net Margins Return on Equity Return on Assets
Kindred Healthcare -8.06% 2.29% 0.30%
Quest Diagnostics 8.82% 15.53% 7.18%

Summary

Quest Diagnostics beats Kindred Healthcare on 10 of the 17 factors compared between the two stocks.

About Kindred Healthcare

Kindred Healthcare, Inc., incorporated on March 27, 1998, is a healthcare services company. The Company, through its subsidiaries, operates transitional care (TC) hospitals, a home health, hospice and community care business, inpatient rehabilitation hospitals (IRFs), a contract rehabilitation services business, nursing centers and assisted living facilities across the United States. The Company operates through divisions: the Kindred at Home division, the hospital division, the Kindred Rehabilitation Services division and the nursing center division. These divisions represent six segments: home health services, hospice services, hospitals, Kindred Hospital Rehabilitation Services, RehabCare and nursing centers. The home health services and hospice services operating segments are contained within the Kindred at Home division while the Kindred Hospital Rehabilitation Services and RehabCare operating segments are both contained within the Kindred Rehabilitation Services division.

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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