Humana Inc Stock Valuation – February 2016 $HUM

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – February 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Humana Inc (HUM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Humana Inc. (Humana) is a health and well-being company. The Company operates in three segments: Retail, Employer Group and Healthcare Services. The Company’s medical and specialty insurance products allow members to access health care services through its network of health care providers. Its Retail Segment consists of products sold on a retail basis to individuals, including medical and supplemental benefit plans. Its Employer Group segment consists of products sold to employer groups, including medical and supplemental benefit plans, as well as health and wellness products. Its Healthcare Services segment consists of businesses, which offers services, including pharmacy solutions, provider services, home-based services, integrated behavioral health services, and predictive modeling and informatics services to other Humana businesses, as well as external health plan members, external health plans, and other employers or individuals.


To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.


Downloadable PDF version of this valuation:

ModernGraham Valuation of HUM

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $24,089,577,781 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 61.18% Pass
5. Moderate PEmg Ratio PEmg < 20 20.06 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.34 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

HUM value chart February 2016

EPSmg $7.98
MG Growth Estimate 1.83%
MG Value $97.14
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $115.78
MG Value based on 0% Growth $67.87
Market Implied Growth Rate 5.78%
Current Price $160.14
% of Intrinsic Value 164.86%

Humana Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg ratio. The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $7.12 in 2012 to an estimated $7.98 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.78% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.  Humana Inc receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

HUM charts February 2016

Graham Number $113.48
PEmg 20.06
PB Ratio 2.34
Dividend Yield 0.72%
Number of Consecutive Years of Dividend Growth 6


Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information Dec2015
Long-Term Debt $3,821,000,000
Total Assets $24,705,000,000
Intangible Assets $3,265,000,000
Total Liabilities $14,359,000,000
Shares Outstanding (Diluted Average) 151,142,000

Earnings Per Share History

Next Fiscal Year Estimate $8.20
Dec2015 $8.44
Dec2014 $7.36
Dec2013 $7.73
Dec2012 $7.47
Dec2011 $8.46
Dec2010 $6.47
Dec2009 $6.15
Dec2008 $3.83
Dec2007 $4.91
Dec2006 $2.90
Dec2005 $1.87
Dec2004 $1.72
Dec2003 $1.38
Dec2002 $0.83
Dec2001 $0.70
Dec2000 $0.54
Dec1999 -$2.28
Dec1998 $0.77
Dec1997 $1.05
Dec1996 $0.07

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $7.98
Dec2015 $7.88
Dec2014 $7.57
Dec2013 $7.53
Dec2012 $7.12
Dec2011 $6.61
Dec2010 $5.41
Dec2009 $4.56
Dec2008 $3.53
Dec2007 $3.11
Dec2006 $2.05
Dec2005 $1.52
Dec2004 $1.24
Dec2003 $0.74
Dec2002 $0.32
Dec2001 $0.09
Dec2000 -$0.13

Recommended Reading:

Other ModernGraham posts about the company

Humana Inc. Analysis – July 2015 Update $HUM
Humana Inc. Quarterly Valuation – April 2015 $HUM
58 Companies in the Spotlight This Week – 1/31/15
Humana Inc. Quarterly Valuation – January 2015 $HUM
18 Companies in the Spotlight This Week – 10/25/14

Other ModernGraham posts about related companies

Prudential Financial Inc Valuation – February 2016 $PRU
Anthem Inc Valuation – February 2016 $ANTM
Aflac Inc Valuation – February 2016 $AFL
MetLife Inc Valuation – February 2016 Update $MET
Aetna Inc Valuation – February 2016 Update $AET
Marsh & McLennan Company Valuation – January 2016 Update $MMC
Aon PLC Valuation – January 2016 Update $AON
Progressive Corp Valuation – November 2015 Update $PGR
Progressive Corp Valuation – November 2015 Update $PGR
Ace Limited Valuation – November 2015 Update $ACE


The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.






Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.