Critical Review: Humana (HUM) & Anthem (ANTM)

Humana (NYSE: HUM) and Anthem (NYSE:ANTM) are both large-cap medical companies, but which is the superior stock? We will contrast the two businesses based on the strength of their valuation, earnings, institutional ownership, profitability, risk, dividends and analyst recommendations.

Profitability

This table compares Humana and Anthem’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Humana 3.37% 15.85% 5.76%
Anthem 3.24% 12.93% 4.96%

Volatility & Risk

Humana has a beta of 0.91, suggesting that its share price is 9% less volatile than the S&P 500. Comparatively, Anthem has a beta of 0.73, suggesting that its share price is 27% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Humana and Anthem, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Humana 0 7 12 0 2.63
Anthem 0 9 8 0 2.47

Humana currently has a consensus target price of $243.44, suggesting a potential downside of 1.70%. Anthem has a consensus target price of $181.31, suggesting a potential downside of 5.55%. Given Humana’s stronger consensus rating and higher possible upside, equities analysts clearly believe Humana is more favorable than Anthem.

Dividends

Humana pays an annual dividend of $1.60 per share and has a dividend yield of 0.6%. Anthem pays an annual dividend of $2.60 per share and has a dividend yield of 1.4%. Humana pays out 13.1% of its earnings in the form of a dividend. Anthem pays out 24.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Humana has raised its dividend for 2 consecutive years and Anthem has raised its dividend for 6 consecutive years. Anthem is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider & Institutional Ownership

99.1% of Humana shares are owned by institutional investors. Comparatively, 89.5% of Anthem shares are owned by institutional investors. 0.8% of Humana shares are owned by company insiders. Comparatively, 0.4% of Anthem shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Valuation & Earnings

This table compares Humana and Anthem’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Humana $53.87 billion 0.66 $2.66 billion $12.25 20.22
Anthem $88.03 billion 0.57 $5.75 billion $10.56 18.18

Anthem has higher revenue and earnings than Humana. Anthem is trading at a lower price-to-earnings ratio than Humana, indicating that it is currently the more affordable of the two stocks.

Summary

Humana beats Anthem on 13 of the 17 factors compared between the two stocks.

Humana Company Profile

Humana Inc. is a health and well-being company. The Company’s segments include Retail, Group and Specialty, Healthcare Services and Individual Commercial. The Retail segment consists of Medicare benefits, as well as individual commercial fully insured medical and specialty health insurance benefits, including dental, vision, and other supplemental health and financial protection products. The Group and Specialty segment consists of employer group commercial fully insured medical and specialty health insurance benefits, including dental, vision, and other supplemental health. The Healthcare Services segment includes services offered to its health plan members, as well as to third parties, including pharmacy solutions, provider services, home-based services and clinical programs, as well as services and capabilities to manage population health. The Individual Commercial segment includes Individual Commercial products marketed under the HumanaOne brand.

Anthem Company Profile

Anthem, Inc. is a health benefits company. The Company operates through three segments: Commercial and Specialty Business, Government Business and Other. It offers a spectrum of network-based managed care plans to large and small employer, individual, Medicaid and Medicare markets. Its managed care plans include preferred provider organizations; health maintenance organizations; point-of-service plans; indemnity plans and other hybrid plans, including consumer-driven health plans; and hospital only and limited benefit products. It also provides an array of managed care services to self-funded customers, including claims processing, underwriting, stop loss insurance, actuarial services, provider network access, medical cost management, disease management, wellness programs and other administrative services. It provides an array of specialty and other insurance products and services, such as dental, vision, life and disability insurance benefits and radiology benefit management.

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