Why Humana Inc (HUM) May Struggle to Outperform: A Look at Future Challenges

Exploring the Potential Headwinds for Humana Inc

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Jul 01, 2025

Long-established in the Healthcare Plans industry, Humana Inc (HUM, Financial) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 2.47%, juxtaposed with a three-month change of -5.02%. However, fresh insights from the GF Score hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of Humana Inc.

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What Is the GF Score?

The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.

Based on the above method, GuruFocus assigned Humana Inc the GF Score of 68 out of 100, which signals poor future outperformance potential.

Understanding Humana Inc's Business

Humana Inc is one of the largest private health insurers in the US, with a market cap of $30.24 billion. The firm has carved a niche specializing in government-sponsored programs, with nearly all its medical membership stemming from Medicare, Medicaid, and the military's Tricare program. Beyond medical insurance, the company provides other healthcare services, including primary-care services, at-home services, and pharmacy benefit management. With sales amounting to $120.26 billion, Humana Inc's operations are extensive, though its operating margin data is currently unavailable.

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Financial Strength Breakdown

Humana Inc's financial strength indicators present some concerning insights about the company's balance sheet health. Humana Inc has an interest coverage ratio of 4.63, which positions it worse than 73.33% of 15 companies in the Healthcare Plans industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. It's worth noting that the esteemed investor Benjamin Graham typically favored companies with an interest coverage ratio of at least five.

Additionally, the company's low cash-to-debt ratio at 0.32 indicates a struggle in handling existing debt levels.

Conclusion

While Humana Inc's profitability and growth metrics show some promise, the company's financial strength and valuation rankings suggest potential underperformance. The GF Score highlights the firm's challenges in maintaining its historical performance levels. Investors should consider these factors when evaluating Humana Inc's future prospects. For those seeking companies with strong GF Scores, GuruFocus Premium members can explore more options using the following screener link: GF Score Screen.

This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.

Disclosures

I/We may personally own shares in some of the companies mentioned above. However, those positions are not material to either the company or to my/our portfolios.