Humana Stock Buy Recommendation Reiterated (HUM)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- Humana (NYSE: HUM) has been reiterated by TheStreet Ratings as a buy with a ratings score of A-. 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, attractive valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins.

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Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 15.2%. Since the same quarter one year prior, revenues slightly increased by 5.5%. 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 0.30 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 1.57, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has significantly increased by 111.40% to $205.00 million when compared to the same quarter last year. In addition, HUMANA INC has also vastly surpassed the industry average cash flow growth rate of -16.92%.
  • HUMANA INC reported flat earnings per share in the most recent quarter. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, HUMANA INC reported lower earnings of $7.46 versus $8.44 in the prior year. This year, the market expects an improvement in earnings ($7.90 versus $7.46).

Humana Inc. operates as a health care company that offers a range of insurance products and health and wellness services that incorporate an integrated approach to lifelong well-being. The company operates in three segments: Retail, Employer Group, and Health and Well-Being Services. Humana has a market cap of $11.5 billion and is part of the health care sector and health services industry. The company has a P/E ratio of 10.00, below the S&P 500 P/E ratio of 18.00. Shares are up 6.4% year to date as of the close of trading on Friday.

You can view the full Humana Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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