Comments on: Quest Diagnostics(DGX) cheaper, but is it cheap? http://www.inelegantinvestor.com/2006/10/04/quest-diagnosticsdgx-cheaper-but-is-it-cheap/ Something of Value Fri, 21 Nov 2008 02:34:06 +0000 http://wordpress.org/?v=2.6 By: TheValueBlogs » Quest Diagnostics(DGX) cheaper, but is it cheap? http://www.inelegantinvestor.com/2006/10/04/quest-diagnosticsdgx-cheaper-but-is-it-cheap/#comment-23 TheValueBlogs » Quest Diagnostics(DGX) cheaper, but is it cheap? Thu, 05 Oct 2006 23:32:27 +0000 http://www.inelegantinvestor.com/2006/10/04/quest-diagnosticsdgx-cheaper-but-is-it-cheap/#comment-23 [...] To continue reading click here. [...] [...] To continue reading click here. [...]

]]> By: investor http://www.inelegantinvestor.com/2006/10/04/quest-diagnosticsdgx-cheaper-but-is-it-cheap/#comment-22 investor Wed, 04 Oct 2006 15:29:44 +0000 http://www.inelegantinvestor.com/2006/10/04/quest-diagnosticsdgx-cheaper-but-is-it-cheap/#comment-22 My assumption was that the 2006 number is unaffected since the current contract runs until year end. I further assumed that beginning Jaunuary 1, the company's baseline would be $3 minus 10% profit loss from UNH(admittedly a rough estimate) or $2.70, but that the expected 10-15% profit growth off a base of $2.70 would bring us back to an expected range of $3, which is significantly lower than current 2007 consensus estimate of $3.47. This is all back-of-the-envelope stuff. The company didn't really give a lot to go on which is another reason I'm not buying now. If you have a more detailed model, I'd love to see it. My assumption was that the 2006 number is unaffected since the current contract runs until year end. I further assumed that beginning Jaunuary 1, the company’s baseline would be $3 minus 10% profit loss from UNH(admittedly a rough estimate) or $2.70, but that the expected 10-15% profit growth off a base of $2.70 would bring us back to an expected range of $3, which is significantly lower than current 2007 consensus estimate of $3.47. This is all back-of-the-envelope stuff. The company didn’t really give a lot to go on which is another reason I’m not buying now. If you have a more detailed model, I’d love to see it.

]]> By: Sameer Tendulkar http://www.inelegantinvestor.com/2006/10/04/quest-diagnosticsdgx-cheaper-but-is-it-cheap/#comment-21 Sameer Tendulkar Wed, 04 Oct 2006 15:04:04 +0000 http://www.inelegantinvestor.com/2006/10/04/quest-diagnosticsdgx-cheaper-but-is-it-cheap/#comment-21 Hi Investor, Thanx for the article. I liked the cash part of it. But I am thinking about how you got a 16x PE estimate for FY06 and FY07. I believe the company's guidance of $2.95-$3.05 earnings will not hold now with the UnitedHealth contract out of the way (and as you say, assuming DGX will fail to regain much of the lost 7% revenue from uncontracted services to UnitedHealth). So, in my opinion, the stock looks even more expensive, with a PE upwards of 16......more in the 17.4 range (am assuming a $2.88 FY06 EPS as per one of my models). Warm Regards, Sameer. Hi Investor,

Thanx for the article. I liked the cash part of it. But I am thinking about how you got a 16x PE estimate for FY06 and FY07. I believe the company’s guidance of $2.95-$3.05 earnings will not hold now with the UnitedHealth contract out of the way (and as you say, assuming DGX will fail to regain much of the lost 7% revenue from uncontracted services to UnitedHealth). So, in my opinion, the stock looks even more expensive, with a PE upwards of 16……more in the 17.4 range (am assuming a $2.88 FY06 EPS as per one of my models).

Warm Regards,
Sameer.

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