Humana (HUM): Assessing Valuation Following Expansion of TailorCare Partnership for Medicare Advantage Members

Humana (HUM) just announced it is expanding its partnership with TailorCare, bringing personalized musculoskeletal care coordination and home-based therapy solutions to Medicare Advantage members in Dallas and Denver. If you are following the stock, this is an interesting move. By targeting conditions that impact nearly half of Americans and drive significant healthcare spending, Humana is aiming to deliver greater value for members while potentially setting the stage for new growth in its Medicare Advantage business.

This news comes during a period when Humana shares have seen both the ebb and flow of market sentiment. Over the past year, the stock has declined 19%, but there has been a shift recently, with a 5% rise in the past three months. Earlier this year, the company began a push into value-based care and digital health, and now this expansion underscores its strategy to address major cost drivers and improve patient outcomes in a fiercely competitive health insurance field.

With Humana’s shares still trading below last year’s levels despite moves like this, do investors have a genuine buying opportunity here, or is the potential for future growth already reflected in the stock price?

Most Popular Narrative: 14.7% Undervalued

The prevailing narrative suggests that Humana is currently undervalued by nearly 15%, based on a comprehensive view of its future earnings outlook and competitive position.

Humana is focusing on operational efficiency by increasing the use of AI in its contact centers to enhance customer interactions and reduce costs. This approach may impact net margins. The company is making substantial efforts to improve clinical excellence, including medication adherence campaigns and member engagement through in-home visits combined with virtual health. These initiatives are expected to enhance medical margins and member experience.

Want a glimpse into why analysts see more upside for Humana? Their model is powered by ambitious profit targets, critical revenue milestones, and a bold margin forecast. Curious about the exact levers behind this valuation call? Dive in to see which moving parts could drive the next big move in the share price.

Result: Fair Value of $298.95 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, some risks remain, including regulatory uncertainty around Medicare Advantage ratings and challenges integrating new business segments. Both of these factors could pressure Humana’s growth outlook.

Find out about the key risks to this Humana narrative.

Another View: The DCF Model Perspective

While the analyst consensus focuses on future earnings and valuation multiples, our SWS DCF model offers a different perspective. This approach also suggests that Humana may be undervalued, though such models rely on long-term forecasts. Which outlook would you trust more?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Humana for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Humana Narrative

If you would rather dig into the details or want a fresh perspective, it’s quick and easy to form your own view from the data in minutes. Do it your way.

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding Humana.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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