Investors in Humana (NYSE: HUM) Have Achieved a Strong 140% Return in the Past Five Years
The worst outcome, after buying a company’s stock (assuming there is no leverage), would be to lose all the money you invested. But on the bright side, if you buy shares of a high quality company at the right price, you can earn well over 100%. For example, the Humana Inc. (NYSE: HUM) The stock price has climbed 132% in the past five years. Most would be very happy. We note that the share price has risen 1.4% in the past seven days.
So let’s take a look and see if the long term performance of the business has been in line with the progress of the underlying business.
See our latest review for Humana
To quote Buffett, “Ships will sail around the world but the Flat Earth Society will thrive. There will continue to be wide spreads between price and value in the market … ‘One way to look at how market sentiment has changed over time is to look at the interaction between price. a company’s stock and earnings per share (EPS).
In five years, Humana has managed to increase its earnings per share by 24% per year. EPS growth is more impressive than the 18% annual share price gain over the same period. So it looks like the market isn’t as enthusiastic about the title these days.
You can see how EPS has changed over time in the image below (click on the graph to see the exact values).
We consider it positive that insiders have made significant purchases over the past year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide for the business. It might be worth taking a look at our free Humana earnings, revenue and cash flow report.
What about dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. TSR is a yield calculation that takes into account the value of cash dividends (assuming any dividends received have been reinvested) and the calculated value of any discounted capital increase and spinoff. Arguably, the TSR gives a more complete picture of the return generated by a stock. In the case of Humana, it has a TSR of 140% for the past 5 years. This exceeds the return on its share price that we mentioned earlier. This is largely the result of his dividend payments!
A different perspective
Humana shareholders are up 1.9% over the year (including dividends). But this yield is lower than the market. This is probably a good sign that the company has an even better long-term performance history, having provided shareholders with an annual TSR of 19% over five years. Maybe the stock price is just taking a break as the company executes its growth strategy. I find it very interesting to look at the long-term share price as an indicator of company performance. But to really get an overview, we have to take other information into account as well. For example, we have identified 3 warning signs for Humana (1 cannot be ignored) that you should be aware of.
Humana is not the only one to buy. So take a look at this free list of growing companies with insider buying.
Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently traded on the US stock exchanges.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St does not have any position in the mentioned stocks.
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