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Humana Inc. (NYSE:HUM): Does The -3.6% Earnings Drop Reflect A Longer Term Trend?

Simply Wall St

After looking at Humana Inc.'s (NYSE:HUM) latest earnings announcement (31 March 2019), I found it useful to revisit the company's performance in the past couple of years and assess this against the most recent figures. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Humana's performance has been impacted by industry movements. In this article I briefly touch on my key findings.

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View our latest analysis for Humana

How Well Did HUM Perform?

HUM's trailing twelve-month earnings (from 31 March 2019) of US$1.8b has declined by -3.6% compared to the previous year.

Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 12%, indicating the rate at which HUM is growing has slowed down. Why is this? Let's examine what's going on with margins and whether the rest of the industry is facing the same headwind.

NYSE:HUM Income Statement, May 20th 2019

In terms of returns from investment, Humana has fallen short of achieving a 20% return on equity (ROE), recording 16% instead. However, its return on assets (ROA) of 7.0% exceeds the US Healthcare industry of 5.4%, indicating Humana has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Humana’s debt level, has increased over the past 3 years from 13% to 19%.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors influencing its business. I recommend you continue to research Humana to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for HUM’s future growth? Take a look at our free research report of analyst consensus for HUM’s outlook.
  2. Financial Health: Are HUM’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

NB: Figures in this article are calculated using data from the trailing twelve months from 31 March 2019. This may not be consistent with full year annual report figures.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.