Encompass Health (NYSE:EHC) & Quest Diagnostics (NYSE:DGX) Head to Head Review

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

Analyst Ratings

This is a summary of current ratings and price targets for Encompass Health and Quest Diagnostics, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Encompass Health	0	0	6	1	3.14
Quest Diagnostics	0	8	8	2	2.67

Encompass Health presently has a consensus target price of $131.50, indicating a potential upside of 19.48%. Quest Diagnostics has a consensus target price of $186.00, indicating a potential upside of 10.19%. Given Encompass Health’s stronger consensus rating and higher possible upside, analysts plainly believe Encompass Health is more favorable than Quest Diagnostics.

Dividends

Encompass Health pays an annual dividend of $0.68 per share and has a dividend yield of 0.6%. Quest Diagnostics pays an annual dividend of $3.20 per share and has a dividend yield of 1.9%. Encompass Health pays out 14.0% of its earnings in the form of a dividend. Quest Diagnostics pays out 38.3% 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. Encompass Health has increased its dividend for 2 consecutive years and Quest Diagnostics has increased its dividend for 14 consecutive years. Quest Diagnostics is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk & Volatility

Encompass Health has a beta of 0.88, meaning that its share price is 12% less volatile than the S&P 500. Comparatively, Quest Diagnostics has a beta of 0.49, meaning that its share price is 51% less volatile than the S&P 500.

Earnings & Valuation

This table compares Encompass Health and Quest Diagnostics”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Encompass Health	$5.37 billion	2.06	$455.70 million	$4.84	22.74
Quest Diagnostics	$9.87 billion	1.91	$871.00 million	$8.35	20.22

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

Profitability

This table compares Encompass Health and Quest Diagnostics’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Encompass Health	8.97%	17.63%	7.33%
Quest Diagnostics	9.01%	15.24%	6.64%

Institutional & Insider Ownership

97.3% of Encompass Health shares are held by institutional investors. Comparatively, 88.1% of Quest Diagnostics shares are held by institutional investors. 2.0% of Encompass Health shares are held by company insiders. Comparatively, 8.2% of Quest Diagnostics shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

About Encompass Health

Encompass Health Corporation provides post-acute healthcare services in the United States and Puerto Rico. It owns and operates inpatient rehabilitation hospitals that provide medical, nursing, therapy, and ancillary services. The company provides specialized rehabilitative treatment on an inpatient basis to patients who have experienced physical or cognitive disabilities or injuries due to medical conditions, such as strokes, hip fractures, and various debilitating neurological conditions. It offers services through the Medicare program to federal government, managed care plans and private insurers, state governments, and other patients. The company was formerly known as HealthSouth Corporation and changed its name to Encompass Health Corporation in January 2018. The company was incorporated in 1984 and is based in Birmingham, Alabama.

About Quest Diagnostics

Quest Diagnostics Incorporated provides diagnostic testing and services in the United States and internationally. The company develops and delivers diagnostic information services, such as routine, non-routine and advanced clinical testing, anatomic pathology testing, and other diagnostic information services. It offers diagnostic information services primarily under the Quest Diagnostics brand, as well as under the AmeriPath, Dermpath Diagnostics, ExamOne, and Quanum brands to physicians, hospitals, patients and consumers, health plans, government agencies, employers, retailers, pharmaceutical companies and insurers, and accountable care organizations through a network of laboratories, patient service centers, phlebotomists in physician offices, call centers and mobile phlebotomists, nurses, and other health and wellness professionals. The company also provides risk assessment services for the life insurance industry; and healthcare organizations and clinicians information technology solutions. Quest Diagnostics Incorporated was founded in 1967 and is headquartered in Secaucus, New Jersey.