We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Humana (HUM) vs. Anthem (ANTM): Which is Better Placed?
Read MoreHide Full Article
A strong U.S. economy, aging population and boom in Medicaid and Medicare business bode well for health insurers in the long run. The last few quarters also witnessed active mergers and acquisitions in the industry, leading to a series of consolidations. Despite frequent political interference, the industry remains a promising platform for investment owing to rising demand for value-based health plans, increasing number of baby boomers and better health outcomes through usage of analytics, artificial intelligence plus other advanced technologies.
The healthcare insurance industry is poised for sustained growth across markets, mainly by enhancing government programs. The changing U.S. demography, product modifications and medical cost management also contribute to the progress of industry players.
Further, consolidations led to market share wins and business diversification for the players involved. One pending mega merger is that of Centene Corporation (CNC - Free Report) with WellCare Health Plans, Inc. , which is expected to close by the first half of 2020.
The overall bullish scenario makes us believe that growth will be consistent in this industry, which should boost prospects of companies with strong business fundamentals. The buoyancy in the health insurance space is confirmed by its Zacks Industry Rank within the top 24% (61 of 253).
Shares of Humana and Anthem have gained 9.4% and 18.1% year to date, respectively. The industry has rallied 12.6% year to date compared with the S&P 500 Index’s 24% increase.
Let's analyze certain other parameters to find out which company is better positioned.
Earnings Surprise History
A stock’s earnings surprise track helps investors get an idea about its performance in the previous quarters.
Both companies boast a decent earnings surprise record, having surpassed the Zacks Consensus Estimate in each of the last four quarters.
Humana managed to pull off average four-quarter beat of 8.56% while the same for Anthem reads 3.77%. This proves that Humana has an edge over Anthem here.
Return on Equity
Return on equity is a profitability measure, which accounts for profits generated on shareholders’ equity. Hence, higher ROE reflects the company’s efficiency in using shareholders’ funds and is preferred by all equity investors.
The ROE of 22.3% for Humana compares favorably with Anthem’s ROE of 15.6%.
Valuation
Price-to-earnings value is one of the multiples used for valuing health insurers. Compared with the health insurance industry’s forward 12 month P/E ratio of 15.78, Anthem is undervalued with a reading of 12.81 while Humana’s shares are expensive with a P/E ratio of 18.18.
Debt-to-Equity
Both companies have lower debt-to-equity ratio than the industry average of 65.8. However, Humana’s leverage ratio of 52.3 betters Anthem’s ratio of 62.3. Therefore, Humana is at an advantage over Anthem on this front.
Estimate Movement
For 2019, the Zacks Consensus Estimate for Anthem has moved 0.1% north to $19.43 in the past 30 days while the same for Humana has been revised 0.6% upward to $17.77.
Bottom Line
Our comparative analysis shows that Humana is better-positioned than Anthem with respect to earnings surprise, return on equity, estimate revision and leverage. Meanwhile, Anthem scores higher in terms of price performance and valuation. As the scale is tilted in favor of Humana, the stock discernibly makes a more promising investment proposition.
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers “Most Likely for Early Price Pops.”
Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.6% per year. So be sure to give these hand-picked 7 your immediate attention.
Image: Bigstock
Humana (HUM) vs. Anthem (ANTM): Which is Better Placed?
A strong U.S. economy, aging population and boom in Medicaid and Medicare business bode well for health insurers in the long run. The last few quarters also witnessed active mergers and acquisitions in the industry, leading to a series of consolidations. Despite frequent political interference, the industry remains a promising platform for investment owing to rising demand for value-based health plans, increasing number of baby boomers and better health outcomes through usage of analytics, artificial intelligence plus other advanced technologies.
The healthcare insurance industry is poised for sustained growth across markets, mainly by enhancing government programs. The changing U.S. demography, product modifications and medical cost management also contribute to the progress of industry players.
Further, consolidations led to market share wins and business diversification for the players involved. One pending mega merger is that of Centene Corporation (CNC - Free Report) with WellCare Health Plans, Inc. , which is expected to close by the first half of 2020.
The overall bullish scenario makes us believe that growth will be consistent in this industry, which should boost prospects of companies with strong business fundamentals. The buoyancy in the health insurance space is confirmed by its Zacks Industry Rank within the top 24% (61 of 253).
Against this backdrop, let’s look at the two leading health insurers, namely Anthem Inc. and Humana Inc. (HUM - Free Report) with respective market capitalization of $73.1 billion and $45.2 billion. Each stock has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of Humana and Anthem have gained 9.4% and 18.1% year to date, respectively. The industry has rallied 12.6% year to date compared with the S&P 500 Index’s 24% increase.
Let's analyze certain other parameters to find out which company is better positioned.
Earnings Surprise History
A stock’s earnings surprise track helps investors get an idea about its performance in the previous quarters.
Both companies boast a decent earnings surprise record, having surpassed the Zacks Consensus Estimate in each of the last four quarters.
Humana managed to pull off average four-quarter beat of 8.56% while the same for Anthem reads 3.77%. This proves that Humana has an edge over Anthem here.
Return on Equity
Return on equity is a profitability measure, which accounts for profits generated on shareholders’ equity. Hence, higher ROE reflects the company’s efficiency in using shareholders’ funds and is preferred by all equity investors.
The ROE of 22.3% for Humana compares favorably with Anthem’s ROE of 15.6%.
Valuation
Price-to-earnings value is one of the multiples used for valuing health insurers. Compared with the health insurance industry’s forward 12 month P/E ratio of 15.78, Anthem is undervalued with a reading of 12.81 while Humana’s shares are expensive with a P/E ratio of 18.18.
Debt-to-Equity
Both companies have lower debt-to-equity ratio than the industry average of 65.8. However, Humana’s leverage ratio of 52.3 betters Anthem’s ratio of 62.3. Therefore, Humana is at an advantage over Anthem on this front.
Estimate Movement
For 2019, the Zacks Consensus Estimate for Anthem has moved 0.1% north to $19.43 in the past 30 days while the same for Humana has been revised 0.6% upward to $17.77.
Bottom Line
Our comparative analysis shows that Humana is better-positioned than Anthem with respect to earnings surprise, return on equity, estimate revision and leverage. Meanwhile, Anthem scores higher in terms of price performance and valuation. As the scale is tilted in favor of Humana, the stock discernibly makes a more promising investment proposition.
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers “Most Likely for Early Price Pops.”
Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.6% per year. So be sure to give these hand-picked 7 your immediate attention.
See 7 handpicked stocks now >>