Humana Inc. (HUM) | Investment Case

1. Company Snapshot

1.a. Company Description

Humana Inc., together with its subsidiaries, operates as a health and well-being company in the United States.It operates through three segments: Retail, Group and Specialty, and Healthcare Services.The company offers medical and supplemental benefit plans to individuals.

It also has a contract with Centers for Medicare and Medicaid Services to administer the Limited Income Newly Eligible Transition prescription drug plan program; and contracts with various states to provide Medicaid, dual eligible, and long-term support services benefits.In addition, the company provides commercial fully insured medical and specialty health insurance benefits comprising dental, vision, and other supplemental health benefits; and administrative services only products to individuals and employer groups, as well as military services, such as TRICARE T2017 East Region contract.Further, it offers pharmacy solutions, provider services, and home solutions services, such as home health and other services to its health plan members, as well as to third parties.

As of December 31, 2021, the company had approximately 17 million members in medical benefit plans, as well as approximately 5 million members in specialty products.Humana Inc.was founded in 1961 and is headquartered in Louisville, Kentucky.

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1.b. Last Insights on HUM

Breaking News: Humana Inc. is set to present at the 2026 Leerink Partners Global Healthcare Conference on March 10, 2026. CEO Jim Rechtin and CFO Celeste Mellet will make a presentation to investors. This comes after a recent comparison with UnitedHealth, where UNH's diversified model was seen as likely to offer stronger upside due to rising medical costs testing managed care margins. No recent earnings release was found. Analysts at some firms have compared the two stocks, with some expressing concerns about Humana's position relative to UnitedHealth.

1.c. Company Highlights

Last Price	181.58
Change Percentage	-3.04%
Open	184.47
Previous Close	187.28
Market Cap ( Millions)	21898
Volume	1507148
Year High	315.35
Year Low	169.61
M A 50	229.3
M A 200	250.1

FCF Yield	1.71%
Dividend Yield	1.95%
ROE	6.59%
Debt / Equity	70.05%
Net Debt / EBIDTA	280.91%
Price To Book	1.24
Price Earnings Ratio	18.39
Price To FCF	58.39
Price To sales	0.17
EV / EBITDA	10.34

2. Humana's 2025 Earnings: A Closer Look

Humana reported adjusted EPS of $17.14 for 2025, in line with expectations and above initial guidance. The company's revenue growth was driven by a 20% increase in Medicare membership, with approximately 1 million new members. The individual MA margin is expected to double in 2026, normalized for STARS. The actual EPS came out at -$6.61465, relative to estimates at -$4.01, indicating a significant deviation from expectations.

Publication Date: Feb -12

                                    📋 Highlights
                                    2026 Individual MA Membership Growth:
                                                Anticipated 25% growth, with new members expected to be accretive and drive margin doubling year-over-year (normalized for STARS).
2025 Financial Performance:
                                                Adjusted EPS of $17.14 achieved, exceeding initial guidance and reflecting strong operational execution.
Medicare Retention & Acquisition:
                                                Retention rate improved by 500 basis points YoY, with 70% of new sales from competitor switchers and 75% from high-lifetime-value channels (10ppt improvement YoY).
2026 Margin Outlook:
                                                Individual MA margins projected to double YoY (after STARS normalization), supported by clinical excellence and cost efficiencies, despite breakeven expectations due to STARS headwinds.
Operational & Strategic Investments:
                                                $550M spent in 2025 on initiatives, with $9M expected in 2026 for margin expansion, including 500bps improvement in Group MA margins via recontracting and cost-cutting.

                                

Financial Performance

The company's financial performance was driven by its Medicare product and experience, with a retention rate improvement of over 500 basis points year over year. The new members are expected to be accretive to the enterprise in 2026, driving significant lifetime value. The expected full-year adjusted EPS for 2026 is at least $9, with the anticipated year-over-year decline driven by the STARS headwind. Analysts estimate next year's revenue growth at 7.5%.

Valuation Metrics

To understand what's priced in, we can look at Humana's valuation metrics. The company's P/E Ratio is 17.77, P/B Ratio is 1.2, and P/S Ratio is 0.16. Additionally, the EV/EBITDA is 10.02, and the Dividend Yield is 2.02%. The Net Debt / EBITDA is 2.8, indicating a moderate level of debt. As Celeste Mellet mentioned, "We remain confident in our customer-led strategy and 2026 membership outlook." This confidence is reflected in the company's valuation metrics.

Margin Expansion

The company expects margin expansion in 2026, driven by clinical excellence and operating efficiency efforts. The individual MA pretax margin is expected to double in 2026, normalizing for STARS. The company is making progress on tactical efficiency improvements, including consolidating its supplier base and the early retirement program. These efforts are expected to contribute to year-over-year operating expense ratio improvements.

Growth Prospects

Humana expects continued growth in clinics and CenterWell, as well as progress in strategic initiatives on the pharmacy side. The company anticipates improvement in the margin in Group MA, with a 500 basis point pickup this year due to recontracting efforts. There is still upside in Medicaid as the company moves through the J curve. The company's growth prospects are driven by its consumer-centric strategy and its ability to adapt to the funding environment.

3. NewsRoom

Humana Introduces New Value-Based Cardiology Care Partnerships for Medicare Advantage Members

Mar -03

Source: businesswire.com

Humana Foundation Increases Investment to Help End the Veteran Suicide Crisis

Mar -03

Source: businesswire.com

Humana Long Climb: Navigating The 4-STAR Recovery And The J-Curve

Mar -03

Source: seekingalpha.com

Elo Mutual Pension Insurance Co Raises Holdings in Humana Inc. $HUM

Mar -03

Source: defenseworld.net

Is the Options Market Predicting a Spike in Humana Stock?

Mar -02

Source: zacks.com

DNB Asset Management AS Sells 2,694 Shares of Humana Inc. $HUM

Mar -01

Source: defenseworld.net

Artisan Partners Limited Partnership Sells 28,849 Shares of Humana Inc. $HUM

Feb -27

Source: defenseworld.net

Humana Inc. to Present at the 2026 Leerink Partners Global Healthcare Conference

Feb -26

Source: businesswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (11.84%)

6. Segments

Insurance

Expected Growth: 11.1%

Humana's growth is driven by increasing Medicare Advantage penetration, expansion in individual commercial markets, and investments in healthcare services and technology, positioning the company for long-term success.

Centerwell

Expected Growth: 10.2%

Centerwell's growth is driven by increasing demand for value-based primary care services, particularly among Medicare Advantage members. The acquisition of Partners in Primary Care and the expansion of existing centers will further fuel growth.

Eliminations/Corporate

Expected Growth: 4.5%

Humana's Eliminations/Corporate segment growth is driven by increasing demand for health insurance, expansion of Medicare Advantage and Medicaid programs, and strategic acquisitions, further solidifying its position as a leading health insurance provider.

7. Detailed Products

Individual and Family Plans

Humana offers individual and family plans that provide health insurance coverage to individuals and families who are not covered by an employer-sponsored plan.

Group Health Plans

Humana offers group health plans to employers who want to provide health insurance coverage to their employees.

Medicare Advantage Plans

Humana offers Medicare Advantage plans to seniors and people with disabilities who are eligible for Medicare.

Medicare Supplement Plans

Humana offers Medicare Supplement plans to seniors who want to supplement their Medicare coverage.

Dental and Vision Plans

Humana offers dental and vision plans to individuals and groups who want to add dental and vision coverage to their health insurance plan.

Pharmacy Benefit Management

Humana offers pharmacy benefit management services to help manage prescription drug costs and improve health outcomes.

Wellness and Population Health

Humana offers wellness and population health services to help individuals and groups improve their health and reduce healthcare costs.

8. Humana Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Humana Inc. operates in a highly regulated industry, and the threat of substitutes is moderate. While there are alternative healthcare providers, the complexity of the healthcare system and the need for specialized services limit the threat of substitutes.

Bargaining Power Of Customers

Humana Inc. has a large customer base, and individual customers have limited bargaining power. However, large employer groups and government contracts may have more negotiating power.

Bargaining Power Of Suppliers

Humana Inc. relies on a network of healthcare providers, and the bargaining power of suppliers is moderate. While some providers may have more negotiating power, Humana's scale and market presence mitigate this threat.

Threat Of New Entrants

The healthcare industry has high barriers to entry, including regulatory hurdles and significant capital requirements. This limits the threat of new entrants.

Intensity Of Rivalry

The healthcare industry is highly competitive, with multiple players vying for market share. Humana Inc. faces intense competition from other health insurers, as well as new entrants and disruptors.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	42.10%
Debt Cost	5.34%
Equity Weight	57.90%
Equity Cost	6.44%
WACC	5.97%
Leverage	72.72%

11. Quality Control: Humana Inc. passed 4 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

CVS Health

A-Score: 5.6/10

Value: 5.0

Growth: 3.9

Quality: 2.6

Yield: 6.0

Momentum: 9.0

Volatility: 7.3

1-Year Total Return ->

Boston Scientific

A-Score: 5.2/10

Value: 1.2

Growth: 6.6

Quality: 6.8

Yield: 0.0

Momentum: 7.5

Volatility: 9.3

1-Year Total Return ->

Elevance Health

A-Score: 5.0/10

Value: 6.4

Growth: 5.7

Quality: 6.8

Yield: 3.0

Momentum: 2.0

Volatility: 6.3

1-Year Total Return ->

UnitedHealth

A-Score: 4.3/10

Value: 5.3

Growth: 6.1

Quality: 5.2

Yield: 4.0

Momentum: 0.5

Volatility: 5.0

1-Year Total Return ->

Humana

A-Score: 3.9/10

Value: 5.3

Growth: 5.2

Quality: 4.1

Yield: 2.0

Momentum: 2.0

Volatility: 4.7

1-Year Total Return ->

Centene

A-Score: 3.8/10

Value: 9.5

Growth: 5.6

Quality: 3.3

Yield: 0.0

Momentum: 0.5

Volatility: 4.0

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

14.37%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

5.97%

Humana Inc. - US4448591028

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on HUM

1.c. Company Highlights

Less Volatile

Better Quality

Higher Growth

Earnings Beats

Revenues Beats

Stable Momentum

Average Growth

Weak Momentum

Average Yield

Medium Volatility

Fairly Valued

Average Quality

2. Humana's 2025 Earnings: A Closer Look

Financial Performance

Valuation Metrics

Margin Expansion

Growth Prospects

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (11.84%)

6. Segments

Insurance

Expected Growth: 11.1%

Centerwell

Expected Growth: 10.2%

Eliminations/Corporate

Expected Growth: 4.5%

7. Detailed Products

Individual and Family Plans

Group Health Plans

Medicare Advantage Plans

Medicare Supplement Plans

Dental and Vision Plans

Pharmacy Benefit Management

Wellness and Population Health

8. Humana Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Humana Inc. passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

181.58$

Current Price

181.58$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA