Magellan Health (NASDAQ: MGLN) and Humana (NYSE:HUM) are both medical companies, but which is the superior stock? We will compare the two businesses based on the strength of their earnings, risk, valuation, profitabiliy, dividends, analyst recommendations and institutional ownership.

Risk and Volatility

Magellan Health has a beta of 0.59, indicating that its share price is 41% less volatile than the S&P 500. Comparatively, Humana has a beta of 0.91, indicating that its share price is 9% less volatile than the S&P 500.

Profitability

This table compares Magellan Health and Humana’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Magellan Health 1.59% 8.88% 4.08%
Humana 3.37% 15.85% 5.76%

Dividends

Humana pays an annual dividend of $1.60 per share and has a dividend yield of 0.6%. Magellan Health does not pay a dividend. Humana pays out 13.1% of its earnings in the form of a dividend. Magellan Health has raised its dividend for 6 consecutive years.

Valuation & Earnings

This table compares Magellan Health and Humana’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Magellan Health $5.28 billion 0.35 $242.58 million $3.53 22.17
Humana $53.87 billion 0.68 $2.66 billion $12.25 20.81

Humana has higher revenue and earnings than Magellan Health. Humana is trading at a lower price-to-earnings ratio than Magellan Health, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

93.5% of Magellan Health shares are owned by institutional investors. Comparatively, 99.7% of Humana shares are owned by institutional investors. 3.6% of Magellan Health shares are owned by insiders. Comparatively, 0.8% of Humana shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Magellan Health and Humana, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Magellan Health 1 0 3 0 2.50
Humana 0 7 12 0 2.63

Magellan Health presently has a consensus price target of $80.25, suggesting a potential upside of 2.56%. Humana has a consensus price target of $242.67, suggesting a potential downside of 4.82%. Given Magellan Health’s higher probable upside, research analysts clearly believe Magellan Health is more favorable than Humana.

Summary

Humana beats Magellan Health on 13 of the 17 factors compared between the two stocks.

Magellan Health Company Profile

Magellan Health, Inc. is engaged in the healthcare management business. The Company’s segments include Healthcare, Pharmacy Management and Corporate. It is focused on managing special populations, complete pharmacy benefits and other specialty areas of healthcare. Its Healthcare includes its management of behavioral healthcare services and employee assistance program (EAP) services, management of other specialty areas, including diagnostic imaging and musculoskeletal management, and the integrated management of physical, behavioral and pharmaceutical healthcare for special populations, delivered through Magellan Complete Care (MCC). Its Pharmacy Management segment consists of products and solutions that provide clinical and financial management of pharmaceuticals paid under medical and pharmacy benefit programs. Its Corporate segment consists primarily of operational support functions. It provides services to health plans and other managed care organizations (MCOs).

Humana Company Profile

Humana Inc. is a health and well-being company. The Company’s segments include Retail, Group and Specialty, Healthcare Services and Individual Commercial. The Retail segment consists of Medicare benefits, as well as individual commercial fully insured medical and specialty health insurance benefits, including dental, vision, and other supplemental health and financial protection products. The Group and Specialty segment consists of employer group commercial fully insured medical and specialty health insurance benefits, including dental, vision, and other supplemental health. The Healthcare Services segment includes services offered to its health plan members, as well as to third parties, including pharmacy solutions, provider services, home-based services and clinical programs, as well as services and capabilities to manage population health. The Individual Commercial segment includes Individual Commercial products marketed under the HumanaOne brand.

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