Humana Inc (HUM): What’s Next After The Failed Merger?

Is Humana A Buy?

It’s no surprise that we are in an unknown time when it comes to healthcare in the United States. Everything changed back in 2010 when the Affordable Care Act became law. Now, everything is up in the air as President Trump (2) has repeatedly said he plans to scrap the Affordable Care Act and start anew.

Even with this uncertainty, you wouldn’t know it by looking at the recent performance of the company stock. Since President Trump was elected, the stock price has soared from $175 a share to over $205 a share. It is clear that investors think that scraping the current health insurance system and starting over is a good thing.

So should you consider buying Humana Inc (NYSE:HUM)?

As it stands now, the failed merger between Humana and Aetna Inc (NYSE:AET) is a good thing for both companies. Humana in particular has a plan for growing its business in the coming years and has made clear that other capital investments are likely.

In addition to the above, the company is reinvesting in itself and rewarding shareholders at the same time. They announced a share buyback program of $2 billion through 2017. They have also increased their dividend from $0.29 per share to $0.40 per share, which is close to a 40% increase.

With the stock price shooting up since November, it is currently trading at 50 times earnings per share. Other large health insurers are much less expensive when looking at this metric.

As a result and taking everything into consideration, it would be in your best interest to wait for a pullback in the stock price before jumping in. Humana Inc (NYSE:HUM) has big plans and is committing itself to returning profits to its shareholders. However investors seem a little too excited for the future prospects of the company and as a result have the stock overpriced.

This author has no positions in any stock mentioned and does not plan to open any positions in any stocks mentioned for at least 72 hours after publication of this article.