Why Humana Stock Could be a Healthy Portfolio Addition

Is HUM still a buy after bouncing back over 30% from lows?

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Humana Inc (NYSE:HUM) is scheduled to release its first-quarter financial results before the open next Wednesday, April 27. Humana stock tends to do well the day after earnings, looking back over the past two years, with six out of eight post-earnings reactions positive, averaging a 2.9% return the day after earnings, regardless of direction. This time around, the options pits are pricing in a 3.8% swing.

Speaking of, Humana calls have been incredibly popular lately. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), HUM sports a 10-day call/put volume ratio of 4.00, which sits higher than all but 1% of readings from the past year, suggesting a much healthier-than-usual appetite for these bullish bets recently. 

Short-term options traders have been incredibly call-biased, too. This is per HUM's Schaeffer's put/call volume ratio (SOIR) of 0.86, which stands higher than just 13% of readings from the past 12 months. 

Humana stock has been struggling to topple its year-to-date breakeven level, though it boasts a 4.4% year-over-year lead. The 30-day moving average has provided support for Humana stock's recent climb up the charts. Moreover, Humana offers a dividend yield of 0.63% with a forward dividend of $2.89.

april 20 HUM

From a fundamental point of view, Humana stock also presents itself as a solid option for value investors due to the insurance company’s relatively high growth rate. HUM currently trades at a forward price-earnings ratio of 19.08 and a price-sales ratio of 0.72. The insurance company has also increased annual revenues and net income by 46% and 74%, respectively, since fiscal 2018. In addition, Humana is estimated to increase earnings by 17.1% and revenues by 10.9% for fiscal 2022, as well as grow earnings another 13.4% and revenues another 9.2% for fiscal 2023.

Humana holds a decent balance sheet with $16.6 billion in cash and $13.55 billion in total debt, adding a layer of security for the already-thriving business model.

 

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