Analyzing The Health Insurance Industry

Film director Robert Greenwald appeared on MSNBC earlier today, talking about Sick For Profit, a Brave New Films campaign to expose the greed of big health insurance companies. Here's the interview:

Let's move away from the politics for a moment, and use Kapitall to look at the raw numbers. If you would like to have access to these tools, sign up for our private beta.

Analyzing Five Health Insurance Companies: To analyze the issue, we'll be looking at Aetna (AET), Coventry Healthcare (CVH), United Health Group (UNH), Humana (HUM) and WellPoint (WLP).

Size Has Mattered Over The Last Year: When using the Compar-O-Matic to compare the market cap and annual return of the five health insurance companies, we see that the largest companies (WellPoint and UnitedHealth) have outperformed over the last year.

Debt Levels Have Concerned Investors: It is interesting to note that the worst performing health insurer over the last year, Coventry Healthcare, also has the highest debt ratio.


Analysts Optimistic About Humana and Aetna: The Compar-O-Matic tool also reveals that analysts are most bullish on Aetna and Humana. Coventry Healthcare, with its high debt levels and underperformance over the last year, remains out of favor when compared to other health insurers.

WellPoint Has Most Efficient Workforce: WellPoint generates about $1.4M in sales per employee, well above UnitedHealth ($1.1M) and Humana ($1.0M). The most inefficient health insurance company, according to the sales per employee indicator, is Coventry Healthcare, which only managed to generate about $754K in sales per employee.


WellPoint Has Lowest Expected Earnings Growth: By using the Super Screener tool, we see that the outperforming stock over the last year, WellPoint, also has the lowest expected earnings growth rate over the next 3-5 years. Analysts expect the company's earnings to grow by 11.71%, well below Humana (16.41%) and Aetna (14.92%).

Humana Offers High Growth At A Reasonable Price: Analysts expect Humana to have the highest earnings grow rate over the next 3-5 years, but the company's Price of Profit (PoP) is lower than the other companies in our analysis. Humana's PoP is 5, meaning that investors are paying $5 for every $1 of expected profit over the next 12 months. From a PoP perspective, Humana is cheaper than WellPoint ($9) and Coventry Healthcare (10).Summary: Wall Street analysts are most optimistic about the outlook for Humana and Aetna, probably because of the higher expected earnings growth rate and lower Price of Profit values associated with these companies. It is also possible that the same experts are underestimating WellPoint - the company has outperformed over the last year, used its workforce most efficiently and has a manageable level of debt.

Comments

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nice post and the graphical representations makes it very easy to understand and make a reference to,health industry with 20 million uninsured is a big issue and a turnkey industry of social concern,it will depend from here on the Recovery Position of the economy also,
thanks for a brilliant resource representation,
bill

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