Here's Why Humana (NYSE:HUM) Can Manage Its Debt Responsibly

Simply Wall St.11-19

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when...

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It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when...</p>\n\n<a href=\"https://finance.yahoo.com/news/heres-why-humana-nyse-hum-110014164.html\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU0320765489.SGD","symbol_name":"FTIF - Franklin Mutual US Value A Acc SGD","start_time":0,"source_url":"https://finance.yahoo.com/news/heres-why-humana-nyse-hum-110014164.html","article_id":"2484917395","we_media_id":null,"thumbnails":["https://s.yimg.com/uu/api/res/1.2/TYuERtMVEDQGKcCkp9IFlQ--~B/aD00MzI7dz0xMTk0O2FwcGlkPXl0YWNoeW9u/https://media.zenfs.com/en/simply_wall_st__316/12fdf750b0f25a3272d08040d0ccad91"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2484917395","pubTimestamp":1732014014,"sourceInfo":{"source_id":"yahoofinance","name":"雅虎金融"},"weMediaInfo":null,"summary":"Warren Buffett famously said, 'Volatility is far from synonymous with risk.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We note that Humana Inc.  does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. Humana may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax  to free cash flow, because that will influenc","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"LU0320765489.SGD":"FTIF - Franklin Mutual US Value A Acc SGD","EBIT":"Harbor AlphaEdge Small Cap Earners ETF","LU0070302665.USD":"FRANKLIN MUTUAL U.S. VALUE \"A\" (USD) ACC","HUM":"哈门那","BK4585":"ETF&股票定投概念","BK4533":"AQR资本管理(全球第二大对冲基金)","LU0256863811.USD":"ALLIANZ US EQUITY \"A\" INC","BK4566":"资本集团","LU0211331839.USD":"FRANKLIN MUTUAL GLB DISCOVERY \"A\" (USD) ACC","LU1093756168.USD":"FRANKLIN K2 ALTERNATIVE STRATEGIES \"A\" (USD) ACC","LU0348723411.USD":"ALLIANZ GLOBAL HI-TECH GROWTH \"A\" (USD) INC","SG9999014021.USD":"UNITED GLOBAL DURABLE EQUITIES (USDHDG) ACC","LU0170899867.USD":"EASTSPRING INVESTMENTS WORLD VALUE EQUITY  \"A\" (USD) ACC","LU0238689110.USD":"贝莱德环球动力股票基金","BK4588":"碎股","LU0417517546.SGD":"Allianz US Equity Cl AT Acc SGD","BK4154":"管理型保健护理","NYSE":"纽交所","LU0208291251.USD":"FRANKLIN MUTUAL U.S. VALUE \"A\" (USD) INC","LU1093756325.SGD":"FTIF - Franklin K2 Alt Strat Fd A (acc) SGD-H1","LU1983260115.SGD":"Janus Henderson Horizon Global Sustainable Equity A2 SGD-H","LU0390134368.USD":"FRANKLIN GLOBAL GROWTH \"A\" (USD) ACC","LU0266013472.USD":"AXA WF - Framlington Longevity Economy A Cap USD","SG9999014005.SGD":"United Global Durable Equities Fund Acc SGD","SG9999014013.SGD":"United Global Durable Equities Fund Dis SGD"},"translate_title":"这就是Humana（纽约证券交易所股票代码：HUM）能够负责任地管理其债务的原因","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"NYSE":1,"EBIT":1,"HUM":1},"content_text":"Warren Buffett famously said, 'Volatility is far from synonymous with risk.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We note that Humana Inc. (NYSE:HUM) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating? \n Why Does Debt Bring Risk? \n Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first thing to do when considering how much debt a business uses is to look at its cash and debt together. \n View our latest analysis for Humana \n How Much Debt Does Humana Carry? \n As you can see below, at the end of September 2024, Humana had US$13.4b of debt, up from US$12.0b a year ago. Click the image for more detail. But it also has US$24.1b in cash to offset that, meaning it has US$10.8b net cash. \n\n\n\n  NYSE:HUM Debt to Equity History November 19th 2024\n \n\n A Look At Humana's Liabilities \n Zooming in on the latest balance sheet data, we can see that Humana had liabilities of US$18.7b due within 12 months and liabilities of US$13.7b due beyond that. Offsetting this, it had US$24.1b in cash and US$2.14b in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$6.09b. \n Of course, Humana has a titanic market capitalization of US$33.2b, so these liabilities are probably manageable. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. While it does have liabilities worth noting, Humana also has more cash than debt, so we're pretty confident it can manage its debt safely. \n Importantly, Humana's EBIT fell a jaw-dropping 31% in the last twelve months. If that earnings trend continues then paying off its debt will be about as easy as herding cats on to a roller coaster. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Humana's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting. \n Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. Humana may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Over the most recent three years, Humana recorded free cash flow worth 74% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This free cash flow puts the company in a good position to pay down debt, when appropriate. \nSumming Up\n Although Humana's balance sheet isn't particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of US$10.8b. And it impressed us with free cash flow of -US$4.3b, being 74% of its EBIT. So we don't have any problem with Humana's use of debt. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet.   We've identified 2 warning signs  with Humana , and understanding them should be part of your investment process. \n Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today. \nHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.2","shortVersion":"4.29.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2484917395"}