Humana (HUM): Valuation Insights After Court Ruling on Medicare Advantage Star Ratings

Humana (HUM) shares took a hit after a Texas judge sided with the federal government and dismissed the company’s lawsuit over lowered Medicare Advantage star ratings. These ratings are closely linked to key bonus payments.

See our latest analysis for Humana.

After the court decision, Humana’s share price dipped sharply and momentum has faded compared to earlier in the year. While the stock has climbed 21% over the last 90 days, its 1-year total shareholder return stands at just 1.8%. Performance over the past three and five years has been deeply negative. That recent volatility reflects shifting expectations on risk, especially given mounting pressure on reimbursements and Medicare plans.

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Humana now trades at a notable discount to analyst price targets, yet its business faces renewed headwinds. Is this an overlooked value opportunity, or is the market already accounting for a slower growth outlook?

Most Popular Narrative: 8.7% Undervalued

According to the most popular narrative, Humana’s estimated fair value stands moderately higher than its last close price, which sets the stage for debate over the company’s outlook and market expectations.

Humana is focusing on operational efficiency by increasing the use of AI in its contact centers to enhance customer interactions and reduce costs, which could 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.

Read the complete narrative.

Want to know the real story behind this valuation? This narrative is driven by bold projections for earnings, revenue, and margin expansion over the next several years. Find out which levers analysts believe will shape Humana’s financial future, and discover the surprising assumptions packed into their fair value calculation.

Result: Fair Value of $292.87 (UNDERVALUED)

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

However, challenges related to Medicare Advantage star ratings and ongoing regulatory uncertainty could quickly shift the outlook for both Humana’s growth and valuation narrative.

Find out about the key risks to this Humana narrative.

Build Your Own Humana Narrative

If you want to challenge the current narrative or prefer a hands-on approach, you can dive in and build your own Humana analysis in just a few 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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