HomeMost PopularInvestingHumana vs. CSX Stock: Analyzing Their Potential for the Next Three Years

Humana vs. CSX Stock: Analyzing Their Potential for the Next Three Years

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When it comes to choosing stocks for investment, it’s important to find the ones that best fit your investment style. In this comparison, we analyze two stocks with a similar market capitalization – Humana (NYSE: HUM) and CSX (NYSE: CSX) – to determine which one offers better prospects for the next three years. While these stocks belong to different sectors, their market capitalization and inclusion in the S&P 500 index make them comparable.

Key Points:

  • Humana stock shows better potential than CSX stock.
  • CSX has had a lower Sharpe Ratio than Humana and the S&P 500 Index, indicating lower returns per unit of risk.
  • Both stocks have underperformed the broader market, but Humana is expected to offer better returns in the next three years.

1. Humana’s Revenue Growth Is Better

Humana has demonstrated stronger revenue growth compared to CSX in recent years. While CSX saw an average annual growth rate of 8.5% in the last three years, Humana’s sales grew at an average rate of 12.8%. Humana’s top-line growth is driven by individual Medicare Advantage membership growth and higher per-member medical premiums. The company’s acquisition of Enclara in 2020 has also contributed to its revenue growth. In comparison, CSX’s revenue growth can be partly attributed to its trucking segment sales and a robust pricing environment.

2. CSX Is More Profitable

In terms of profitability, CSX has the upper hand. The company has maintained a higher operating margin than Humana, with a slight increase from 35.4% in 2019 to 35.6% in 2022. In contrast, Humana’s operating margin contracted from 4.9% to 4.3% during the same period. Additionally, CSX has a better debt position with a lower debt-to-equity ratio than Humana. However, Humana has a higher cash-to-assets ratio, indicating a stronger financial position.

3. The Net of It All

Considering revenue growth and financial position, Humana appears to have better potential. Even when comparing the current valuation multiples to historical averages, Humana’s stock seems more favorable. CSX trades at 4.1x revenues compared to its five-year average of 5.0x, while Humana trades at 0.6x revenues compared to its five-year average of 0.8x. Based on Trefis Machine Learning analysis, which takes into account various factors, Humana is expected to offer a return of 19% over the next three years, while CSX is expected to offer a return of 6%.

Screenshot 2023 09 27 at 11.33.49 AM

Although Humana shows better prospects, it’s important to compare CSX to its peers in order to gain a broader perspective. You can find additional valuable comparisons for companies in various industries at Peer Comparisons.

Returns Comparison

Returns Sep 2023 MTD [1] 2023 YTD [1] 2017-23 Total [2]
CSX Return 1% -1% 156%
HUM Return 7% -4% 142%
S&P 500 Return -5% 11% 91%
Trefis Reinforced Value Portfolio -7% 22% 527%

[1] Month-to-date and year-to-date as of 9/27/2023
[2] Cumulative total returns since the end of 2016

While Humana is likely to outperform CSX in the next three years, considering its revenue growth and financial position, it’s always beneficial to do a comprehensive analysis before making any investment decisions.

Disclaimer: The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views and opinions of Nasdaq, Inc.

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