This is a step-by-step stock review to answer the question, is Humana (HUM) stock a good buy?
This article will teach you how to use the 4Ms of investing. This will be a detailed walkthrough to show you how the 4Ms work and why they are important. If you are interested, you can log into Tykr to use the 4M Confidence Booster (Powered by OpenAI) which will allow you to complete a 4M Analysis in less than 60 seconds.
What are the 4Ms?
- MOS (Margin of Safety) – The MOS is the math part of investing which includes the Summary, Score, and MOS (Margin of Safety).
- Meaning – The meaning is the business model and how scalable the revenue streams are.
- Moat – The moat is how the business compares to other companies in the same Sector and Industry.
- Management – The management is the track record of the CEO.
What 4M score are we going for?
- 80-100 = High confidence – Yay! You should have high confidence buying this stock. It passes all 4M!
- 60-79 = Moderate confidence – Alert! There may be better stocks in the market. Only buy this stock if you truly believe the company will improve!
- 0-59 = Low confidence – Warning! There are better stocks in the market. Due to the low score, you should consider looking at other stocks.
Table of Contents
The following links will direct you to key topics to help answer the question, is Humana (HUM) stock a good buy?
1. Humana Company History
- Founded: Humana was founded in 1961 by David A. Jones Sr. and Wendell Cherry in Louisville, Kentucky, initially as a nursing home company called Extendicare.
- Shift to Hospitals: In 1972, the company sold its nursing home business and shifted its focus to hospitals, rebranding as Humana Inc. By the late 1970s, Humana became one of the largest hospital operators in the United States.
- Health Insurance: In the 1980s, Humana entered the health insurance business, leveraging its experience in healthcare delivery to offer a range of health plans, including HMOs and PPOs.
- Divestiture: In 1993, Humana spun off its hospital operations into a separate company, Galen Health Care, to focus exclusively on health insurance and managed care services.
- Medicare and Medicaid: Humana became a major provider of Medicare Advantage and Medicaid plans, expanding its offerings to serve a growing population of seniors and low-income individuals.
- Acquisitions: The company grew through strategic acquisitions, including the purchase of other health plans and healthcare services companies, enhancing its market position.
- Innovation: Humana has been a leader in integrating technology and wellness programs into its health plans, focusing on preventive care and value-based healthcare models.
- Headquarters: Humana is headquartered in Louisville, Kentucky, and continues to be a major player in the U.S. health insurance industry, serving millions of members nationwide.
2. MOS (Margin Of Safety)
When investing in a company, the first step is to look at the financials. Fortunately, Tykr does this for us automatically. The higher the score, the stronger the financials and the safer the investment. The higher the MOS, the higher the potential returns you can make.
- Summary: Overpriced
- Score: 44
- MOS: 1%
To see the most up-to-date Summary, Score, and MOS, please log into Tykr.
3. Meaning
When investing in a company, it’s important to know how a company makes money. A mature business model has multiple streams of revenue which allow the company to weather downturns in the economy.
Here is how Humana makes money:
- Health Insurance Premiums: Humana earns revenue primarily from premiums paid by individuals and employers for health insurance plans, including Medicare Advantage, Medicaid, and individual plans.
- Government Contracts: The company generates income from government contracts, particularly for Medicare and Medicaid programs, which include payments for managing and providing healthcare services to beneficiaries.
- Value-Based Care: Revenue comes from value-based care models where Humana is paid based on the quality and efficiency of care provided to members, often through risk-sharing arrangements with healthcare providers.
- Pharmacy Services: Humana earns from its pharmacy services division, including managing prescription drug plans and operating a pharmacy benefits manager (PBM) that handles medication prescriptions and related services.
- Employer Group Insurance: The company provides insurance solutions to employers, including group health plans, and earns revenue from premiums and administrative fees.
- Healthcare Services: Humana generates income from offering various healthcare services and solutions, including preventive care programs, wellness initiatives, and management of chronic conditions.
- Investment Income: Revenue is also derived from investing funds, including premiums collected and reserves set aside for future claims.
- Kindred Healthcare
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4. Moat
When investing in a company, it’s important to understand how a company ranks against other companies in the same sector and industry. Based on the Score, here is how Humana stacks up against other companies.
- Stryker Corporation.(0R2S) – 95
- ResMed Inc.(0KW4) – 89
- Ypsomed Holding AG.(0QLQ) – 78
- IDEXX Laboratories, Inc.(0J8P) – 78
- Medacta Group SA.(0A05) – 72
- Humana Inc.(0J6Z) – 44
To see the most up-to-date Summary, Score, and MOS and each stock, please log into Tykr.
5. Management
When investing in a company, it’s important to understand who the CEO is, what they have accomplished in the past, and how they have helped this company grow. Good leaders typically have stronger cultures, less turnover, and better returns in the stock market.
- Growth in Medicare Advantage: Jim RechtinExpanded Humana’s Medicare Advantage business, solidifying its position as a leading provider in the Medicare market.
- Acquisition Strategy: Led significant acquisitions, including the purchase of Kindred Healthcare, enhancing Humana’s capabilities in home health and hospice care.
- Operational Improvements: Implemented operational improvements that increased efficiency and reduced costs, contributing to overall financial performance.
- Value-Based Care Initiatives: Advanced Humana’s focus on value-based care, improving patient outcomes and cost-effectiveness through innovative healthcare delivery models.
- Digital Transformation: Enhanced Humana’s digital capabilities, including the development of tools and platforms to improve customer engagement and streamline services.
- Financial Performance: Drove strong financial performance and revenue growth, helping to position Humana as a major player in the health insurance industry.
6. 4M Score
All of our homework on this company leads up to the 4M Score. A lot of investors only look at the numbers. Yes, it’s important to look at the first M (MOS) which is the math part of investing but it’s also important to look past the numbers and also look at the Meaning, Moat, and Management. If all 4Ms pass, we should have high confidence in buying this stock.
What 4M score are we going for?
- 80-100 = High confidence – Yay! You should have high confidence buying this stock. It passes all 4M!
- 60-79 = Moderate confidence – Alert! There may be better stocks in the market. Only buy this stock if you truly believe the company will improve!
- 0-59 = Low confidence – Warning! There are better stocks in the market. Due to the low score, you should consider looking at other stocks.
👉 The 4M Score of Humana (HUM) is 54/100.
To see the most up-to-date 4M Score, please log into Tykr.
7. Is Humana (HUM) stock a good buy?
Some of the top questions investors can have is Humana (HUM) stock a good buy or should I buy Humana (HUM) stock?
Humana is a strong investment option due to its leading position in the Medicare Advantage market and its robust growth in health insurance services. The company has expanded its reach through strategic acquisitions, such as Kindred Healthcare, which enhance its capabilities in home health and hospice care.
Humana’s focus on value-based care and digital transformation strengthens its operational efficiency and patient outcomes. However, investors should consider potential risks, such as changes in healthcare regulations and market competition.
Overall, Humana’s leadership in Medicare, strategic growth, and innovative healthcare solutions make it a promising investment, though regulatory and competitive factors should be evaluated.
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To truly know if Humana is a good stock to buy or sell, we recommend you log into Tykr. Within seconds you can see the Summary, Score, MOS, and 4M Score.
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The Summary, Score, and MOS of this stock may have changed since the posting of this review. Please login to Tykr to see up-to-date information.