Yahoo Finance Should You Think About Buying Humana Inc. (NYSE:HUM) Now?
Today we're going to take a look at the well-established Humana Inc. (NYSE:HUM). The company's stock saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s take a look at Humana’s outlook and value based on the most recent financial data to see if the opportunity still exists.
See our latest analysis for Humana
What's the opportunity in Humana?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 20.58x is currently trading slightly below its industry peers’ ratio of 21.03x, which means if you buy Humana today, you’d be paying a decent price for it. And if you believe that Humana should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Furthermore, Humana’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
What does the future of Humana look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Humana's earnings over the next few years are expected to increase by 38%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has already priced in HUM’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at HUM? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you’ve been keeping tabs on HUM, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for HUM, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example - Humana has 2 warning signs we think you should be aware of.
If you are no longer interested in Humana, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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