It hasn't been a great morning session for Humana investors, who have watched their shares sink by -1.5% to a price of $267.03. Some of you might be wondering if it's time to buy the dip. If you are considering this, make sure to check the company's fundamentals first to determine if the shares are fairly valued at today's prices.
a Lower P/B Ratio Than Its Sector Average but Priced Beyond Its Margin of Safety:
Humana Inc. provides medical and specialty insurance products in the United States. The company belongs to the Health Care sector, which has an average price to earnings (P/E) ratio of 22.94 and an average price to book (P/B) ratio of 3.19. In contrast, Humana has a trailing 12 month P/E ratio of 20.4 and a P/B ratio of 1.76.
Humana has moved 5.2% over the last year compared to 14.4% for the S&P 500 — a difference of -9.2%. Humana has a 52 week high of $315.35 and a 52 week low of $206.87.
Increasing Revenues but Narrowing Margins:
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $64,888 | $77,155 | $83,064 | $92,870 | $106,374 | $117,761 |
| Operating Margins | 5% | 6% | 4% | 4% | 4% | 2% |
| Net Margins | 4% | 4% | 4% | 3% | 2% | 1% |
| Net Income (M) | $2,707 | $3,367 | $2,933 | $2,806 | $2,489 | $1,207 |
| Net Interest Expense (M) | $242 | $283 | $326 | $401 | $493 | $584 |
| Depreciation & Amort. (M) | $505 | $528 | $640 | $749 | $850 | $908 |
| Diluted Shares (M) | 135 | 133 | 129 | 127 | 124 | 121 |
| Earnings Per Share | $20.1 | $25.31 | $22.67 | $22.08 | $20.0 | $9.98 |
| EPS Growth | n/a | 25.92% | -10.43% | -2.6% | -9.42% | -50.1% |
| Avg. Price | $277.02 | $374.9 | $419.98 | $429.4 | $457.81 | $271.0 |
| P/E Ratio | 13.71 | 14.72 | 18.43 | 19.34 | 22.79 | 27.07 |
| Free Cash Flow (M) | $4,548 | $4,675 | $920 | $3,450 | $2,977 | $2,391 |
| CAPEX (M) | $736 | $964 | $1,342 | $1,137 | $1,004 | $575 |
| EV / EBITDA | 10.59 | 9.34 | 16.69 | 13.29 | 13.2 | 12.16 |
| Total Debt (M) | $5,666 | $6,660 | $12,494 | $11,126 | $11,656 | $11,721 |
| Net Debt / EBITDA | 0.44 | 0.36 | 2.4 | 1.33 | 1.43 | 2.74 |
| Current Ratio | 1.82 | 1.77 | 1.62 | 1.52 | 1.59 | 1.76 |
Humana has weak operating margins with a negative growth trend, declining EPS growth, and positive cash flows. On the other hand, the company benefits from rapidly growing revenues and decreasing reinvestment in the business and a decent current ratio of 1.76. Furthermore, Humana has significant leverage levels.
