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What Has Humana (HUM) Shedding Value on Tuesday?

NEW YORK (TheStreet) -- Humana Inc HUM is trading slightly lower on Tuesday after Deutsche Bank downgraded the stock to "sell" from a previous "hold" rating. The bank's $87 price target was unchanged. 

"We see above-average risks in 2014 that we believe are under-appreciated by investors," analysts wrote in a research report. "Our proprietary work on pricing shows HUM with the softest Commercial premium increases among public managed care organizations (MCO) for 2014.

"We rate shares Sell based on above-average margin risk combined with premium valuation."

By early morning trading, the health care provider had fallen 0.6% to $100.19. 

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TheStreet Ratings team rates HUMANA INC as a Buy with a ratings score of B. The team has this to say about their recommendation:

"We rate HUMANA INC (HUM) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, attractive valuation levels and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.3%. Since the same quarter one year prior, revenues slightly increased by 6.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • HUM's debt-to-equity ratio is very low at 0.27 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, HUM has a quick ratio of 1.58, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Health Care Providers & Services industry and the overall market, HUMANA INC's return on equity exceeds that of both the industry average and the S&P 500.
  • Compared to its closing price of one year ago, HUM's share price has jumped by 50.26%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, HUM should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.

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