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Humana Inc (NYSE:HUM)


A stock’s GAVA™ (pronounced like “lava”) is a measure of its intrinsic value. The GAVA™ (GuruFocus Automatic Value Appraisal) is calculated using a formula developed by GuruFocus and 4 pieces of public data:

• Earnings
• Dividends
• Past Growth
• Current Interest Rates

The GAVA™ also takes into account 3 special situations:

• Unsustainable growth
• Unprofitable growth
• Inadequate earnings

The GAVA™ calculation is fully automated. And never requires more than 7 inputs:

1. Earnings
2. Dividends
•3. Book Value
•4. Revenue Growth Rate
•5. EBITDA Growth Rate
•6. Book Value Growth Rate
•7. Stock Classification: Financial/Non-Financial

Every GAVA™ calculation uses 4 variables. The 3 additional inputs are only used to determine when special rules apply to a stock. Depending on which special rules apply to a stock, different metrics are used to calculate the stock’s GAVA™.

Unlike most measures of intrinsic value, the GAVA™ is equally applicable to holding companies, banks, railroads, retailers, and industrials.

The GAVA™ needs to be combined with a stock’s business predictability rating before you can use it to make a buy or sell decision. The more predictable a company is, the more accurate its GAVA™ will tend to be.

Finally, never buy a stock simply because its GAVA™ is higher than its current price. Only buy a stock when there is a sufficient margin of safety. GuruFocus - following in Ben Graham’s footsteps - recommends a margin of safety of 50%.

In other words, a stock’s GAVA™ should be at least 1.5 times its price for the stock to be a good buy.


(Earnings) E equals…


The highest of:
• 10-Year Average Return on Equity * Book Value
• 10-Year Book Value Growth * Book Value
• Moody’s 30-Year AAA Bond Yield * Book Value


The highest of:
• 10-Year Average Net Margin * Sales
• Moody’s 30-Year AAA Bond Yield * Book Value

(Dividends) D equals

• Dividends per share

(Growth) G equals


The lowest of:
• 10-Year Revenue Per Share Growth
• 10-Year Book Value Per Share Growth
• 20%


The lowest of:
• 10-Year Revenue Per Share Growth
• 10-Year EBITDA Per Share Growth
• 20%

(Bond Yield) B equals

• Moody’s 30-Year AAA Bond Yield

Related Terms

Price/Sales Ratio, Price/Earnings Ratio, Price/Book Ratio, Intrinsic Value (DCF Projected), Intrinsic Value (DCF), Intrinsic Value (DE), Graham Number

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