In late February, Quest picked up privately held Athena Diagnostics for $740 million, paying a little under seven times Athena's revenue in the process. For Quest, this results in one less competitor and a 12-percentage-point boost in market share within the $750 million neurology testing market, in which it competes with LabCorp
Unlike the Athena pickup, Quest's move on Celera
Quest seems to be doing a good job balancing short-term gains with long-term growth. Athena is the near-term catalyst, while the addition and development of Celera's patents should strengthen Quest's position down the road. Utilization trends are rumored to be improving, likely giving share prices a near-term boost, but looming reimbursement reductions are sitting like a dark gray cloud on the horizon. I like this company's prospects, but my immediate concern is that share prices have climbed more than 6% in just the past week. Investors may want to keep Quest Diagnostics on their watchlist and see if a better entry point reveals itself.
David Williamson owns no shares of the companies mentioned. Quest Diagnostics and UnitedHealth Group are Motley Fool Inside Value recommendations. LabCorp and UnitedHealth Group are Motley Fool Stock Advisor recommendations. Motley Fool Options has recommended a diagonal call position on UnitedHealth Group. The Fool owns shares of UnitedHealth Group. Motley Fool Alpha LLC owns shares of LabCorp and Quest Diagnostics. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.