Humana Inc. (NYSE:HUM)

The analysis of the financial ratios over the observed quarters reveals several distinct patterns and fluctuations in the company's operational efficiency and liquidity management.

Receivables Turnover

The receivables turnover ratio exhibits significant variability throughout the periods. Initially, from March 2019 to December 2019, it starts at a high level of approximately 60.97 and then sharply decreases to around 31.3 by September 2020. Subsequently, there are noticeable oscillations with spikes approaching 66.78 in March 2021 and 68.53 in September 2023, interspersed with declines to values near 26.54 and 27.10 during mid-2022 and mid-2024, respectively. This pattern suggests irregularities in the efficiency of collecting receivables, potentially reflecting changes in credit policies, market conditions, or customer payment behaviors over time.

Payables Turnover

The payables turnover ratio remains relatively stable with moderate fluctuations between approximately 7.1 and 8.8 across all periods, indicating consistent management of payables. Minor increases and decreases are observed but without significant trend shifts. The general steadiness implies a controlled and predictable pace at which the company settles its obligations to suppliers.

Working Capital Turnover

A positive upward trend is observed in the working capital turnover ratio over the timeline. Starting near 6.04 in late 2019, the ratio steadily increases, peaking at about 10.54 in December 2022, before slightly declining yet maintaining elevated levels around 8 by mid-2024. This upward movement reflects improving efficiency in utilizing working capital to generate revenue, signaling more effective operational management or enhanced sales performance relative to working capital employed.

Average Receivable Collection Period

The average collection period for receivables fluctuates between 5 and 14 days. Periods of faster collections close to 5 days occur intermittently, such as in March 2021 and September 2023, while slower collection periods near 13-14 days are noted around mid-2022 and mid-2024. These variations align inversely with the receivables turnover ratio and suggest times of both improved and weakened cash inflow speed from customer payments.

Average Payables Payment Period

The payable payment period remains relatively steady, fluctuating between 41 and 51 days. It shows minor increases around mid-2019 and late 2019 but generally hovers around the mid-40s throughout the timeframe. This consistency points toward a stable credit arrangement with suppliers and controlled cash outflows regarding payable settlements.

In summary, the company demonstrates steady control over payables management, reflected in the stable payables turnover and payment period. However, the receivables turnover and average collection periods show noticeable volatility, impacting cash inflow timing. Meanwhile, the working capital turnover ratio improvement suggests enhanced utilization of resources to support revenue generation. The fluctuations in receivables-related metrics may warrant further attention to optimize cash cycle management.

External Revenues

Over the observed period, external revenues generally exhibit an upward trend with some fluctuations. Starting from 16,006 million US dollars in March 2019, revenues show a consistent increase reaching a peak of 29,323 million in March 2024. There is noticeable growth during 2020 despite some quarterly variability, particularly between June and December 2020. The revenue growth continues through 2021 and 2022, although the latter half of 2022 shows a slight decline. From early 2023 onwards, revenues trend upwards again, maintaining levels above 26,000 million, peaking at 29,323 million by the first quarter of 2024. This indicates sustained revenue growth over five years, with some cyclical dips likely related to seasonal or operational factors.

Receivables, Less Allowances

The receivables balance shows significant volatility over the period. The initial values in 2019 fluctuate between approximately 850 and 2,000 million US dollars. Following this, there is a notable increase reaching over 3,300 million in mid-2022, followed by sharp decreases and rises through late 2022 and 2023. The first quarter of 2024 reports a substantial increase to approximately 3,925 million, the highest level recorded in the dataset. These fluctuations suggest variable collection cycles or changes in credit policies, possibly influenced by revenue growth or operational shifts.

Receivables Turnover Ratio

The receivables turnover ratio exhibits a high degree of variability, indicating changing efficiency in collecting receivables. Early period data for 2019 is missing, but starting from late 2019, ratios range markedly from below 30 to above 60. High turnover ratios occur sporadically, for example at the end of 2019 and early 2021, reflecting periods of rapid collection relative to receivables outstanding. Conversely, lower turnover ratios around 2022 and mid-2024 coincide with higher receivables balances, suggesting slower collection periods during these times. Overall, the inconsistency in turnover ratios implies fluctuating receivables management efficiency or changes in the composition of receivables.

The financial data reveals several notable trends across the periods analyzed. Benefits, measured in millions of US dollars, demonstrate a general upward trajectory. Starting at 13,493 in March 2019, benefits increased steadily with minor fluctuations, reaching 25,120 by September 2024. This growth indicates an overall rise in the value or volume of benefits over time, with periods such as March 2023 to March 2024 showing more pronounced increases.

Benefits payable also exhibit an increasing trend, starting from 6,024 million in March 2019 and rising to 11,125 million by September 2024. There are some fluctuations in the values, particularly noticeable between 2020 and 2021, but the general movement indicates growing liabilities in terms of benefits payable. The increase between March 2023 and June 2024 is especially marked, suggesting a growth in short-term obligations related to benefits.

Regarding the payables turnover ratio, data is available only from December 2019 onward. Initially, the ratio stood at 8.97, but it declined to a low of around 7.12 in September 2020, indicating a slowdown in the frequency of payables being paid or turned over during that period. After this trough, the ratio generally improved, fluctuating between 7.6 and 8.8, and reaching 8.81 by September 2024. This suggests an overall improvement in managing payables turnover, with the company potentially paying off liabilities more frequently or efficiently over the more recent periods.

Benefits

Consistent growth is observed over the years, indicating expansion or increased financial obligations in benefits. The value nearly doubled from early 2019 to late 2024.

Benefits Payable

Reflects a rising trend alongside benefits, implying increased short-term liabilities, with some volatility but a clear upward momentum by the end of the period.

Payables Turnover

Shows initial decline during the early phase of the data set but recovers to higher levels, suggesting improved efficiency in paying liabilities over time.

Overall, the data implies expanding business activity or growth in services related to benefits, accompanied by increasing obligations. The company appears to manage payables more efficiently in recent years, as indicated by the recovering and strengthening payables turnover ratio. The rising benefits payable in line with benefits could highlight the need for ongoing monitoring of liquidity and working capital management to sustain operational stability.

The financial data reflects several key trends over the periods presented, particularly in working capital, external revenues, and working capital turnover ratios.

Working Capital

There is an overall upward trend in working capital from early 2019 through to the end of the period in 2024. The value increased from 7,746 million US dollars in March 2019 to 14,199 million US dollars by September 2024. Notably, fluctuations are observable within individual years, with some quarters showing declines or plateaus; for example, a decrease occurred in the last quarter of 2019 and similarly in the fourth quarter of 2020. Despite these short-term decreases, the medium to long-term pathway indicates a steady build-up of working capital.

External Revenues

External revenues show a persistent growth trajectory over the examined timeframe. Starting from 16,006 million US dollars in the first quarter of 2019, revenues reached a peak of 29,323 million US dollars by the first quarter of 2024. The increases are generally consistent quarter-over-quarter with minor variabilities. Some quarters, such as the fourth quarter of 2020 and late 2022, indicate slight revenue contractions, but the overall pattern is strongly positive and reflects significant expansion in sales or services rendered.

Working Capital Turnover

This ratio, available from March 2020 onward, exhibits an upward trend for most of the period, indicating improving efficiency in the use of working capital to generate revenues. Early figures around 7.19 dropped gradually to a low near 6.04 in the last quarter of 2020 but then climbed steadily to a maximum of 10.54 in the last quarter of 2022. After reaching this peak, the ratio experienced some volatility, with modest declines and recoveries, ultimately stabilizing around the range of 8 to 9 by late 2024. The elevated turnover ratios in the latest periods suggest enhanced operational management or improved liquidity utilization compared to earlier quarters.

Overall, the data shows positive growth in both working capital and external revenues, with working capital turnover ratios indicating increasing efficiency in capital use, particularly after 2020. This combination suggests strengthened financial performance with better resource management over the recent years assessed.

Receivables Turnover

The receivables turnover ratio displays a fluctuating pattern over the analyzed quarters. Initially, data is missing prior to March 31, 2020. Starting from that point, the ratio swings between lower and higher values, reaching peaks near or above 60 in several quarters such as March 31, 2020 (60.97), December 31, 2020 (64.58), March 31, 2021 (66.78), September 30, 2023 (68.53), and March 31, 2024 (53.07). Conversely, there are quarters with considerably lower turnover ratios around the 26 to 35 range, for example June 30, 2020 (33.43), September 30, 2020 (31.3), June 30, 2022 (27.18), and June 30, 2024 (27.1). This volatility suggests varying efficiency in collecting receivables over time, with periods of both faster and slower turnover.

Average Receivable Collection Period

The average receivable collection period tends to inversely correspond to the receivables turnover ratio, varying between approximately 5 and 14 days across the periods for which data is available. Lower collection periods are observed in quarters with higher turnover ratios, such as 5 days on March 31, 2021, and September 30, 2023, and 6 days on March 31, 2020, and December 31, 2020. Higher collection periods correspond to lower turnover quarters, for example 14 days on September 30, 2022, and 13 days on June 30, 2024. Overall, the collection period fluctuates within a relatively narrow band, indicating variability but generally maintaining a short receivable duration.

General Insights

The data illustrates a cyclical nature in the management of receivables, with efficiency alternating between high and moderate levels over multiple quarters. The reciprocal relationship between receivables turnover and collection periods is evident and consistent, demonstrating that when receivables are collected more frequently, the average duration to collect decreases. Such variations may be influenced by external economic conditions, seasonal business cycles, or internal credit policies. Despite these fluctuations, the collection periods remain relatively short, signaling effective receivables management overall.

The payables turnover ratio exhibits a fluctuating but overall upward trend across the quarters, beginning with values in the range of approximately 7.12 to 8.97. After a low point around the third quarter of 2020 at approximately 7.12, the ratio generally increases, reaching values close to or above 8.0 in later quarters. This indicates improvements in the frequency with which the company settles its payables over time, particularly noticeable in the most recent quarters where the ratio is closer to 8.8.

Correspondingly, the average payables payment period, measured in days, moves inversely to the payables turnover ratio, starting around 41 days by the first record and peaking near 51 days in the second half of 2019. Over subsequent periods, there is a gradual reduction in the number of days payable outstanding, with the most recent quarters showing a decrease to around 41–44 days. This decline suggests that the company is paying its suppliers more promptly in the recent fiscal quarters compared to earlier periods.

Payables Turnover Ratio

The ratio demonstrates variability but an improving trend, indicating an enhanced rate of paying off accounts payable over time.

Average Payables Payment Period

The number of days taken to pay payables initially increased but subsequently declined, reflecting a move toward faster payment cycles in recent quarters.

Overall, the data portrays a positive shift in the company's payables management, with turnover ratios generally rising and payment periods shortening in the most recent fiscal quarters, which could imply more efficient supplier payment practices and potentially better working capital management.