Humana is a Good Stock That Looks Properly Valued
Humana (NYSE:HUM) stock is making another run at its all-time high. And the company’s earnings report may be the catalyst that puts it over the top. However, analyst sentiment suggests limited upside for HUM stock
Humana (NYSE:HUM) stock is making another run at its all-time high. And the company’s earnings report may be the catalyst that puts it over the top. However, analyst sentiment suggests limited upside for HUM stock in the next 12 months.
One reason for that is that Humana is set to deliver an okay, but not exceptional, earnings report. That typically means that the company is performing as expected. There’s nothing wrong with that, but it doesn’t leave much for investors to get excited about.
That certainly seems to be manifest in the company’s stock price. In the last five days, HUM stock is slightly higher on light volume. Investors may be holding their powder waiting for a positive earnings report to move the stock higher. They may also be waiting to hear if analysts raise their price target for the stock which I believe may be what’s necessary to get the stock moving.
A Pandemic Winner
Telehealth was one of the most investable sectors of 2020. The idea of meeting with your doctor online had significantly less adoption than, for example, online banking. But just as the pandemic changed how many people shop and bank, it also changed the way they saw their doctor.
A lot of the attention was focused on pure-play telehealth companies such as Teladoc Health (NYSE:TDOC) and with good reason. TDOC stock more than doubled in 2020. And although it’s pulled back from those highs, many investors believe that telehealth services are here to stay.
However, if you were only focusing on companies like Teladoc, you were missing the growth of telehealth among traditional insurers. And Humana was leading the way in that regard. The pandemic made it essential that telehealth visits be covered by insurance. At the same time, telehealth is an opportunity to bring down the cost of a doctor visit.
Humana wasn’t going to leave that opportunity on the table, and they haven’t. Investors meanwhile have been rewarded with a 20% gain in HUM stock over the past 12 months.
A Growing Dividend Stock
With all the volatility in the market, I know I’m looking for quality dividend stocks. And that may be Humana’s most attractive attribute at this time. The company raised its dividend for the fourth consecutive year in February. The company is averaging dividend growth of 32.28% over the last three years. And the dividend is well supported by the company’s existing and forecasted earnings.
Humana Is Worth Holding
As of this writing, Humana is the third largest health insurer in the nation. The company is in an evergreen market sector. And 2021 may have some opportunities for growth. First, patients will be making their return to doctors' offices and medical centers. And second, Humana has wisely invested in telehealth services. This keeps Humana very relevant for the direction non-urgent primary care is moving.
A month ago, I might have been sounding a more bullish tone. But a 10% gain since March 23 has put the stock into overbought territory. At this point, traders may be able to find some price movement. However, institutional investors are heavily invested in the stock, making it difficult to see a large dip in the stock price unless earnings are a disaster. In which case, you’d probably want to exit the stock anyway.
That being said, Humana is a fine stock to hold for the long term. You can collect a nice dividend, which is becoming very attractive, and look for opportune pullbacks to add to your position.
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