2 Reasons to Like HUM and 1 to Stay Skeptical

October 16, 2025 at 00:05 AM EDT

HUM Cover Image

Over the past six months, Humana’s shares (currently trading at $262.25) have posted a disappointing 8.2% loss, well below the S&P 500’s 26.5% gain. This might have investors contemplating their next move.

Following the pullback, is now an opportune time to buy HUM? Find out in our full research report, it’s free for active Edge members.

Why Does HUM Stock Spark Debate?

With over 80% of its revenue derived from federal government contracts, Humana (NYSE: HUM) provides health insurance plans and healthcare services to approximately 17 million members, with a strong focus on Medicare Advantage plans for seniors.

Two Positive Attributes:

1. Economies of Scale Give It Negotiating Leverage with Suppliers

Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.

With $123.1 billion in revenue over the past 12 months, Humana is one of the most scaled enterprises in healthcare. This is particularly important because health insurance providers companies are volume-driven businesses due to their low margins.

2. Stellar ROIC Showcases Lucrative Growth Opportunities

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Humana’s five-year average ROIC was 48.9%, placing it among the best healthcare companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.

One Reason to be Careful:

Declining Customer Base Reflects Product and Sales Weakness

Revenue growth can be broken down into the number of customers and the average spend per customer. Both are important because an increasing customer base leads to more upselling opportunities while the revenue per customer shows how successful a company was in executing its upselling strategy.

Humana’s total customers came in at 14.84 million in the latest quarter, and over the last two years, their count averaged 3% year-on-year declines. This performance was underwhelming and shows the company lost deals and renewals. It also suggests there may be increasing competition or market saturation. Humana Total Customers

Final Judgment

Humana’s merits more than compensate for its flaws. With the recent decline, the stock trades at 17.8× forward P/E (or $262.25 per share). Is now a good time to buy? See for yourself in our comprehensive research report, it’s free for active Edge members .

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Symbol

Price

Change (%)

AMZN

213.04

-1.43 (-0.67%)

AAPL

252.29

+4.84 (1.96%)

AMD

233.08

-1.48 (-0.63%)

BAC

51.28

+0.84 (1.67%)

GOOG

253.79

+1.91 (0.76%)

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