Humana stock (NYSE:HUM) is up 6% this year, outperforming the broader S&P500, down 21%. Even if we look at the longer term, HUM stocks, with returns of 99% from levels seen in late 2017, significantly outperformed the S&P 500, up 41%. However, the value of HUM’s shares now appears somewhat at around $500, as shown below.
This 99% rise in HUM stock since late 2017 can be attributed to 1. Humana revenue It rose 66% to $89.4 billion over the past 12 months, compared to $53.8 billion in 2017, 2. 20% increase in the company’s profit/loss ratio to 0.7x currently delayed revenue, compared to 0.6x in 2017, and 3. A 12% drop in total shares outstanding to 127 million, driven by $5.1 billion spent on share repurchases during the period. Increase in revenue and decrease in outstanding shares means that Humana
Humana’s core growth was driven by a steady rise in the retail member base to currently 10.1 million, compared to 9.2 million in 2017. Earlier this year, Humana cut its 2022 forecast for Medicare membership growth by nearly half from 325,000 to 375,000 members. Earlier to 150 thousand to 200 thousand members. The company faces challenges in retaining its customers with higher-than-expected terminations during the registration window in 2022. The company’s management cited increased competition as the reason for the rise in terminations.
However, the company’s management recently stated that it expects Medicare Advantage enrollments to rebound in 2023. Furthermore, Humana expects its earnings to rise 14% annually over the next three years.  There are reports of Humana’s interest in acquiring Cano Health (NASDAQ
Looking at the stock valuation, HUM appears to be reasonably priced at $494. At current levels, HUM stock is trading at 19.8 times its forward earnings estimate of $25.00 per share and adjusted basis (based on recently provided company guidance), compared to the past three-year average of 19.4 times, which means that HUM’s stock is priced more favorably. Appropriate.
While HUM’s stock price seems decent, it’s helpful to know how to do it Humana Peers Fare on important metrics. You’ll find other valuable comparisons of companies across industries at Peer comparisons.
Moreover, the Covid-19 crisis has caused many price pauses, which can provide attractive business opportunities. For example, you will be surprised how counterintuitive the stock valuation is UnitedHealth Group vs. Pool Corporation.
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