Humana Inc. (NYSE:HUM)

Return on Assets (ROA)

The Return on Assets reveals an initial period with unavailable data followed by a visible upward trend from 9.31% in March 2020 to a peak of 10.79% at the end of 2020. Subsequently, ROA exhibits a gradual decline, decreasing from 9.63% in the first quarter of 2021 to 5.39% by the end of 2023. The decline continues more sharply into 2024, with ROA falling to 2.72% by the third quarter. This pattern indicates diminishing efficiency in asset utilization over the observed timeframe.

Financial Leverage

The Financial Leverage ratio demonstrates relative stability with mild fluctuations throughout the analyzed periods. Starting from 2.61 in March 2019, it dips slightly to 2.42 by the end of 2019, then rises steadily to reach about 3.12 in the third quarter of 2022. The ratio then oscillates modestly between approximately 2.85 and 3.35 through to the third quarter of 2024. Overall, the leverage remains within a narrow band, indicating a generally consistent approach to debt financing.

Return on Equity (ROE)

The Return on Equity metrics begin with missing data but show a strong increase from 22.49% in March 2020 to a high of 26.34% by the end of 2020. This is followed by a marked downturn over the subsequent three years, declining to 17.79% by the close of 2023. The reduction continues further into 2024, with ROE falling sharply to 7.74% by the third quarter. This significant decrease suggests a decline in the overall profitability attributed to shareholders during this period.

Overall Analysis

Both profitability indicators, ROA and ROE, manifest a pattern of initial strength into early 2021 followed by a steady weakening trend through to mid-2024. This decline in profitability is not accompanied by a substantial change in financial leverage, which remains relatively stable, suggesting that the deterioration in returns is likely due to factors other than changes in capital structure. The persistent decrease in returns points to potential challenges in earnings efficiency or operational performance over time.

The analysis of the financial data reveals several notable trends across the reported periods.

Net Profit Margin

The net profit margin shows an initial emergence starting from March 31, 2020, at 4.2%, followed by some fluctuations. It peaked at 5.67% in December 2020, then generally declined over subsequent periods. From March 2021 onward, margins exhibited a downward trajectory with minor recoveries, dropping to 1.19% by September 2024, indicating decreasing profitability relative to sales over time.

Asset Turnover

Asset turnover ratios started at 2.21 in March 2020 and showed a slight decline through the end of 2020, hitting a low of 1.78 in December 2021. Subsequently, the ratio fluctuated moderately, with occasional recoveries, reaching a high level of 2.28 by December 2024. This pattern suggests variability in how efficiently the company utilizes assets to generate revenue, with a recent trend toward improved asset efficiency.

Financial Leverage

Financial leverage exhibited some volatility, beginning around 2.8 in March 2020, and fluctuating between roughly 2.4 and 3.3 over the periods analyzed. Peaks appeared around mid-2022 and early 2023, with values above 3.0, followed by a slight decrease toward the later periods. This indicates varying degrees of reliance on debt financing, with periods of higher leverage potentially implying increased financial risk.

Return on Equity (ROE)

The ROE data starting from March 2020 reflect an initial strong performance with a peak of 26.34% in December 2020. However, a significant downward trend emerges afterward, falling consistently through to September 2024 when it reached 7.74%. This declining ROE aligns with the decreasing net profit margin, highlighting reduced efficiency in generating shareholder returns over time.

Overall, the financial metrics depict a company experiencing a reduction in profitability and return on equity from 2021 onwards, despite some recovery in asset turnover efficiency. The financial leverage remained relatively stable but showed periods of increase, implying fluctuating financial risk levels. The trends suggest that challenges in maintaining profitability and equity returns have persisted into 2024, even as asset utilization exhibits some improvement.

The analysis of quarterly financial data reveals several notable trends in the company's financial performance across the reported periods.

Tax Burden

The tax burden ratio shows a slight downward trend from around 0.78 in early 2020 to approximately 0.71 in the latest quarters of 2024. The ratio experienced some fluctuations, with a peak near 0.88 in late 2021, before steadily declining. The decreasing trend in tax burden may indicate improved tax efficiency or changes in tax strategies over time.

Interest Burden

The interest burden ratio remained relatively stable around 0.90 in the early periods of 2020, gradually declining towards 0.75 by the third quarter of 2024. This decline suggests an improvement in managing interest expenses relative to earnings before interest and taxes, implying better financial cost control.

EBIT Margin

The EBIT margin experienced considerable variability, initially around 5.77% in early 2020, peaking at 8.17% by the end of 2019 and early 2020. Following this, there was a notable decline, falling steadily to about 2.25% by early 2024. This downward trend indicates decreasing operating profitability, which could be attributed to rising costs, lower revenues, or other operational challenges.

Asset Turnover

Asset turnover showed fluctuations without a clear sustained trend. Starting near 2.21 in early 2020, it dipped below 1.80 in several quarters, at times rebounding to above 2.2. This inconsistency suggests variations in how effectively assets are used to generate revenue, potentially reflecting changes in operational efficiency or asset base adjustments.

Financial Leverage

The financial leverage ratio demonstrated a generally increasing trend from about 2.42 in early 2020 to a peak above 3.30 in the 2022 and 2023 periods before a slight decline towards 2.85 by late 2024. This indicates a higher reliance on debt financing over time, which may increase financial risk but also leverage returns when managed properly.

Return on Equity (ROE)

ROE showed a strong competitive performance initially, reaching highs above 26% in late 2019 and early 2020. However, it experienced a pronounced decline through 2021 to 2024, ending near 7.74%. This sharp downturn reflects decreased shareholder returns, likely influenced by declining operating margins and fluctuating financial leverage, highlighting potential challenges in profitability and efficiency.

The financial metrics analyzed over multiple quarters reveal distinct patterns and trends in the company's profitability, efficiency, and asset management.

Net Profit Margin (%)

The net profit margin exhibits considerable fluctuation over the observed periods. Starting at 4.2% in the first available quarter (March 31, 2020), the margin initially improved, reaching a peak of 5.67% by December 31, 2019. Subsequently, it experienced a downward trend with some minor stabilization around the 3.5% mark between March 2021 and March 2022. From the latter part of 2022 onwards, a clear declining trajectory is evident, with the margin diminishing steadily to 1.19% by September 30, 2024. This long-term decline suggests increasing cost pressures or diminishing pricing power impacting profitability.

Asset Turnover (ratio)

Asset turnover ratios demonstrate relative stability with some volatility from period to period. Beginning with a high of 2.21 in March 2020, the ratio decreased through mid-2020 to around 1.8-1.9, indicating somewhat reduced efficiency in generating revenue from assets. However, from early 2023 onwards, the ratio recovered and increased again above 2.2 by the end of the last reported period, suggesting a renewed improvement in asset utilization and operational efficiency. This recovery may reflect better use of the asset base or sales growth outpacing asset growth.

Return on Assets (ROA) (%)

The ROA mirrors the patterns seen in profitability and asset turnover but with sharper movements. Initially strong at 9.31% in the first quarter of 2020, it declined significantly by the end of 2021 to around 5.9%-6.5%. Following a brief stabilization, ROA decreased further, reaching a low of 2.72% by September 30, 2024. This declining trend indicates that the company's ability to generate returns from its assets has weakened substantially over the recent periods, aligning with diminishing net profit margins despite some recovery in asset turnover.

Overall, the data suggest a challenging environment impacting profitability and returns, even as asset utilization efficiency shows some cyclical improvement. The declining net profit margin and ROA point to possible cost increases or revenue pressures that are not fully offset by operational efficiency gains reflected in the asset turnover ratio. Continuous monitoring and strategic adjustments may be necessary to reverse these downward trends in profitability and returns.

Tax Burden

The tax burden ratio shows a slight decreasing trend from 0.78 in the first quarter of 2020 to 0.71 in the third quarter of 2024. There is a notable increase reaching a peak of 0.88 by the fourth quarter of 2021, followed by a gradual decline through the subsequent periods, indicating some fluctuations in the effective tax rate but an overall reduction in tax expense relative to earnings over time.

Interest Burden

The interest burden ratio has exhibited a steady downtrend starting around 0.93 in early 2020 and falling to 0.75 by the third quarter of 2024. This consistent decline suggests an increasing impact of interest expenses on earnings before tax, possibly reflecting higher debt costs or increased leverage during the period.

EBIT Margin

The EBIT margin percentage displays considerable volatility. It initially increased from 5.77% in the first quarter of 2020 to peak at 8.17% in the fourth quarter of 2019 but then sharply declined in subsequent periods to a low of 2.25% by the third quarter of 2024. This downward trend signals a reduction in operating profitability, indicating potential margin pressure or rising operating costs in the later periods.

Asset Turnover

The asset turnover ratio fluctuates moderately across the quarters without a clear overall trend but remains generally around the range of 1.7 to 2.3. There were periods of decline from 2.21 in early 2019 down to as low as 1.73 in the third quarter of 2023, followed by recovery reaching 2.28 by the third quarter of 2024. This pattern reflects changes in how efficiently assets are utilized to generate revenue, with some periods of improved efficiency and others experiencing reduced turnover.

Return on Assets (ROA)

ROA shows a pattern of fluctuations with a peak of 10.79% in the fourth quarter of 2019, followed by a decline to around 2.72% by the third quarter of 2024. This decline corresponds to the trends seen in EBIT margin and asset turnover, indicating diminished overall profitability and effectiveness in asset utilization over the period.

Tax Burden Trend

The tax burden ratio begins in the first available data period at 0.78 and shows a gradual decrease over time, reaching a low of 0.71 in the most recent quarter. This indicates a slight reduction in the proportion of earnings paid as taxes, although the ratio experiences minor fluctuations, notably peaking at 0.88 during late 2021 before resuming the downward trend. Overall, the tax burden appears to be moderately declining.

Interest Burden Trend

The interest burden ratio demonstrates a downward trajectory, starting near 0.93 in early 2020 and declining steadily to 0.75 by the latest quarter. This trend suggests that the company has been experiencing a progressively lower proportion of earnings absorbed by interest expenses. The decline accelerates in the final quarters, indicating an improving capacity to manage or reduce interest-related costs over time.

EBIT Margin Trend

EBIT margin presents notable volatility across the periods. Initially, it rises from 5.77% to a peak of 8.17% by the end of 2019, followed by a general declining trend with fluctuations. From 2020 onwards, the margin decreases steadily, dropping from above 6% down to 2.25% by the most recent quarter. This decline reflects diminishing operating profitability and suggests either increasing costs or pressure on operating revenues in the latter periods.

Net Profit Margin Trend

Net profit margin mirrors the pattern observed in the EBIT margin, beginning at 4.2% and increasing slightly to 5.67% by the end of 2019, then progressively declining thereafter. By the most recent period, the net profit margin decreases sharply to 1.19%, indicating a substantial reduction in overall profitability. This trend signals either increased expenses, decreased efficiency, or other adverse financial impacts affecting bottom-line results.