There are no safe havens in the stock market. Every stock carries risk. But some less than others. This column features stocks that have shown one or more of the following characteristics: less volatility, better earnings, larger market caps, safe and increasing dividends. In these times of turmoil, our goal is to show readers better opportunities for investing with fewer risks.

December 27, 2010 - Quest Diagnostics, Inc. (DGX-NYSE) provides diagnostic testing, information, and services in the United States and internationally. It offers diagnostic testing services through its network of laboratories and patient service centers; and interpretive consultation to patients and physicians. The company provides commercial clinical testing services, including routine clinical testing for blood chemistries, complete blood cell counts, urinalyses, pregnancy and other prenatal tests, microbiology testing, alcohol and other substance-abuse tests, and allergy tests; cancer diagnostics, such as anatomic pathology services; and gene-based and other esoteric testing, as well as various risk assessment services for insurance companies.

In addition, Quest Diagnostics develops and manufactures products that enable healthcare professionals to make healthcare diagnoses, including HerpeSelect ELISA tests that detect patient antibodies to certain types of Herpes Simplex virus, and sells to academic medical centers, hospitals, and commercial laboratories; White Blood Cell Analyzer, a whole-blood test performed on finger-stick samples for providing a total white blood cell count; and InSure fecal immunochemical test for screening for colorectal cancer.

Further, it develops and integrates clinical connectivity and data management solutions for healthcare organizations, physicians, and clinicians through its Care360 suite of products; offers the ChartMaxx electronic document management system for hospitals; and has capabilities to deploy a health information exchange system enabling healthcare providers to access and manage patient data. The company was founded in 1967 and is headquartered in Madison, New Jersey.

Quest doesn't know about the economic slowdown. Earnings have only been down one year since 1998. That was in 2007 when they went from $3.22 to $2.84. Since then, they've grown to $3.88. This year should finish with $4.00 (according to the consensus of 15 analysts), then hit $4.29 next year. Not exactly home-run growth, but still, it's growth, something most companies only fondly remember. Over the last 5 years, average annual growth in earnings was 9.43%. Going forward, analysts see 11.94% a year, on average.

Still, the competition in the testing industry is intense, and for DGX, one of its strongest competitors is Laboratory Corporation of America. It's taking some business away from DGX. While drugs of abuse testing has improved at DGX, physician demand is lower. With the threat of the H1N1 virus waning, testing for that virus has also diminished. But earnings should still beat last year (see above), as the company cut $500 million in costs over the last two years.

There are a couple of numbers that stand out for DGX. One is the cash sitting in the bank: $369.2 million. That can increase the dividend (now 40 cents a share), buy back stock, or retire debt (40% of the balance sheet at $3.17 billion). Or it could go toward an acquisition of some magnitude with speculation that it might be in the histology area (histology is the study of the microscopic anatomy of cells and tissues of plants and animals), an area that has shown good promise of late. Another number is the P/E: 13.43 for Trailing P/E and 12.69 for the Forward P/E. Both of these are well below the average P/E the stock has had over the last 12 years where the range was from 13.7 to 35 with most years in the high teens or low 20s.

More numbers: Price to sales ratio is 1.26. Price to book is 2.41. Book value is $22.64. Return on equity for the last 12 months was 19% while Return on assets was 10%. Total revenues were $7.39 billion. Cash per share is $2.17. Debt to equity is .82. Current ratio is 1.35. There are 170.4 million shares outstanding with a Float of 138.87 million. Insiders own 17.68% of the stock. Institutions have 73% of the Float.

Conservative investors can spend time with this stock and know it isn't wasted. With a solid cash position, new products, and better margins, DGX is holding its own against strong competition. While earnings growth isn't predicted to be unusually high, if the company starts using its cash to buy back shares or acquire another firm, expect all the earnings predictions to go higher.

- Company Web site: www.questdiagnostics.com

- Ted Allrich