A Comparison of Top Movers: Penn National Gaming, Inc. (PENN), Quest Diagnostics Incorporated (DGX)

The shares of Penn National Gaming, Inc. have decreased by more than -29.33% this year alone. The shares recently went down by -2.72% or -$0.62 and now trades at $22.14. The shares of Quest Diagnostics Incorporated (NYSE:DGX), has slumped by -8.88% year to date as of 12/04/2018. The shares currently trade at $89.74 and have been able to report a change of -5.20% over the past one week.

The stock of Penn National Gaming, Inc. and Quest Diagnostics Incorporated were two of the most active stocks on Tuesday. Investors seem to be very interested in what happens to the stocks of these two companies but do investors favor one over the other? We will analyze the growth, profitability, risk, valuation, and insider trends of both companies and see which one investors prefer.

Profitability and Returns

Growth alone cannot be used to see if the company will be valuable. Shareholders will be the losers if a company invest in ventures that aren’t profitable enough to support upbeat growth. In order for us to accurately measure profitability and return, we will be using the EBITDA margin and Return on Investment (ROI), which balances the difference in capital structure. PENN has an EBITDA margin of 24.87%, this implies that the underlying business of PENN is more profitable. The ROI of PENN is 25.00% while that of DGX is 9.30%. These figures suggest that PENN ventures generate a higher ROI than that of DGX.

Cash Flow

The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, PENN’s free cash flow per share is a positive 2.76, while that of DGX is positive 3.2.

Liquidity and Financial Risk

The ability of a company to meet up with its short-term obligations and be able to clear its longer-term debts is measured using Liquidity and leverage ratios. The current ratio for PENN is 0.70 and that of DGX is 1.20. This implies that it is easier for PENN to cover its immediate obligations over the next 12 months than DGX. The debt ratio of PENN is 64.45 compared to 0.70 for DGX. PENN can be able to settle its long-term debts and thus is a lower financial risk than DGX.


PENN currently trades at a forward P/E of 13.52, a P/B of 28.75, and a P/S of 0.83 while DGX trades at a forward P/E of 13.37, a P/B of 2.30, and a P/S of 1.60. This means that looking at the earnings, book values and sales basis, PENN is the cheaper one. It is very obvious that earnings are the most important factors to investors, thus analysts are most likely to place their bet on the P/E.

Analyst Price Targets and Opinions

The mistake some people make is that they think a cheap stock has more value to it. In order to know the value of a stock, there is need to compare its current price to its likely trading price in the future. The price of PENN is currently at a -32.75% to its one-year price target of 32.92. Looking at its rival pricing, DGX is at a -18% relative to its price target of 109.44.

When looking at the investment recommendation on say a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell), PENN is given a 2.20 while 2.20 placed for DGX. This means that analysts are equally bullish on their outlook for the two stocks stocks.

Insider Activity and Investor Sentiment

Short interest or otherwise called the percentage of a stock’s tradable shares currently being shorted is another data that investors use to get a handle on sentiment. The short ratio for PENN is 3.40 while that of DGX is just 2.42. This means that analysts are more bullish on the forecast for DGX stock.


The stock of Penn National Gaming, Inc. defeats that of Quest Diagnostics Incorporated when the two are compared, with PENN taking 4 out of the total factors that were been considered. PENN happens to be more profitable, generates a higher ROI, has higher cash flow per share, higher liquidity and has a lower financial risk. When looking at the stock valuation, PENN is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for PENN is better on when it is viewed on short interest.

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