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Healthequity (HQY)
NASDAQ:HQY
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Healthequity
(NASDAQ:HQY)
77Outperform
Positive Factors
Financial Performance
HQY pre-announced positive KPIs for FY25, including total custodial assets above Street consensus.
Market Expansion
The HOPE act has the potential to expand eligibility to millions of individuals currently ineligible to contribute to an HSA, increasing HQY’s total addressable market significantly.
Negative Factors
Stock Price Concerns
HQY is near its 52-week highs, benefiting from a positive trend reversal in 5-year Treasury rates and inflation data.
Healthequity (HQY) vs. S&P 500 (SPY)
Market Cap
$8.30B
Dividend YieldN/A
Average Volume (3M)742.61K
Price to Earnings (P/E)87.3
Beta (1Y)0.39
Revenue Growth18.47%
EPS Growth227.77%
CountryUS
Employees3,150
SectorHealthcare
Sector Strength78
IndustryHealthcare Providers & Services
Share Statistics
EPS (TTM)1.10
Shares Outstanding86,662,670
10 Day Avg. Volume804,873
30 Day Avg. Volume742,613
Financial Highlights & Ratios
PEG Ratio0.38
Price to Book (P/B)N/A
Price to Sales (P/S)7.12
Price to Cash Flow (P/CF)22.60
P/FCF Ratio26.40
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$120.00Price Target Upside25.34% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering8
Healthequity Business Overview & Revenue Model
Company DescriptionHealthEquity, Inc. (HQY) is a leading provider in the financial technology sector that specializes in administering health savings accounts (HSAs) and other consumer-directed benefits. Founded in 2002 and headquartered in Draper, Utah, the company offers a comprehensive platform that empowers individuals to optimize their healthcare savings and spending. HealthEquity's core services include HSA administration, flexible spending accounts (FSAs), health reimbursement arrangements (HRAs), and COBRA administration, catering to employers, individuals, and health plan providers.
How the Company Makes MoneyHealthEquity generates revenue through a multi-faceted model primarily centered around its health savings account (HSA) administration services. The company earns money by charging fees for account maintenance and management, which are usually paid by employers or health plan providers. Additionally, HealthEquity benefits from interchange fees on HSA debit card transactions and earns interest on custodial funds held in HSAs. Another significant revenue stream comes from investment income, as account holders can invest their HSA funds in mutual funds and other investment vehicles through HealthEquity's platform. The company also partners with employers and health plans to provide a suite of consumer-directed benefits, such as FSAs and HRAs, which contribute to its earnings through service fees and administration charges. Strategic partnerships with health insurers and financial institutions further enhance its market reach and revenue potential.
Healthequity Financial Statement Overview
Summary
Healthequity has shown strong revenue growth and improved profitability. The balance sheet is robust with low leverage, but negative free cash flow due to high capital expenditures poses potential risks. Improvement in free cash flow management is needed to maintain financial flexibility.Income Statement
Healthequity has demonstrated robust revenue growth with a 15.1% increase in revenue for the TTM (Trailing-Twelve-Months) compared to the previous annual period. Gross profit margin stands at 58.4%, indicating strong cost management. The net profit margin improved significantly to 8.4%, showing enhanced profitability. However, EBIT and EBITDA margins, at 14.4% and 29.2% respectively, suggest room for efficiency improvements compared to industry leaders.82
Very Positive
Balance Sheet
The company's balance sheet reflects strong equity with a debt-to-equity ratio of 0.03, indicating low leverage and financial stability. The equity ratio of 60.9% highlights a solid capital structure. Return on Equity (ROE) at 4.6% is modest, suggesting potential for better utilization of equity capital. Despite these strengths, maintaining growth in equity returns could be beneficial.75
Positive
Cash Flow
Operating cash flow is strong, with an operating cash flow to net income ratio of 3.53, indicating healthy cash generation. However, the free cash flow is negative, reflecting high capital expenditures, which could impact future flexibility. The free cash flow to net income ratio is notably weak, suggesting potential cash flow constraints if capital spending continues at this pace.68
Positive
| Breakdown | |||||
| TTM | Mar 2024 | Mar 2023 | Mar 2022 | Mar 2021 | Mar 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 1.15B | 999.59M | 861.75M | 756.56M | 733.57M | 531.99M | Gross Profit |
| 671.79M | 622.64M | 490.09M | 423.71M | 415.33M | 325.91M | EBIT |
| 165.27M | 128.13M | 38.92M | 34.64M | 83.28M | 77.01M | EBITDA |
| 335.99M | 282.42M | 171.53M | 102.97M | 154.93M | 123.28M | Net Income Common Stockholders |
| 96.70M | 55.71M | -26.14M | -44.29M | 8.83M | 39.66M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 361.48M | 403.98M | 254.27M | 225.41M | 328.80M | 191.73M | Total Assets |
| 510.02M | 3.16B | 3.09B | 3.11B | 2.71B | 2.57B | Total Debt |
| 0.00 | 933.14M | 994.49M | 1.01B | 1.07B | 1.30B | Net Debt |
| -361.48M | 529.16M | 740.22M | 782.82M | 746.17M | 1.11B | Total Liabilities |
| 32.94M | 1.13B | 1.19B | 1.25B | 1.33B | 1.53B | Stockholders Equity |
| 477.08M | 2.04B | 1.90B | 1.85B | 1.38B | 1.03B |
| Cash Flow | Free Cash Flow | ||||
| -161.99M | 196.75M | 31.52M | 3.91M | 84.66M | 63.78M | Operating Cash Flow |
| 341.18M | 242.83M | 150.65M | 141.00M | 181.62M | 105.86M | Investing Cash Flow |
| -503.17M | -46.07M | -119.13M | -639.25M | -96.96M | -1.74B | Financing Cash Flow |
| 150.09M | -47.04M | -2.67M | 394.86M | 52.42M | 1.47B |
Healthequity Technical Analysis
Negative
95.74
Price Trends
105.26
Negative
100.16
Negative
89.65
Positive
Market Momentum
-2.56
Positive
30.83
Neutral
16.02
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For HQY, the sentiment is Negative. The current price of 95.74 is below the 20-day moving average (MA) of 107.19, below the 50-day MA of 105.26, and above the 200-day MA of 89.65, indicating a neutral trend. The MACD of -2.56 indicates Positive momentum. The RSI at 30.83 is Neutral, neither overbought nor oversold. The STOCH value of 16.02 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for HQY.
Healthequity Risk Analysis
Healthequity disclosed 41 risk factors in its most recent earnings report. Healthequity reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Healthequity Peers Comparison
Overall Rating
UnderperformOutperform
Sector (49)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $8.30B | 87.34 | 4.70% | ― | 18.47% | 227.77% | |
77 Outperform | $18.50B | 16.32 | 27.07% | ― | 19.24% | 8.57% | |
75 Outperform | $29.48B | 9.52 | 12.65% | ― | 5.89% | 27.09% | |
73 Outperform | $89.41B | 26.48 | 7.87% | 1.71% | 25.21% | -29.37% | |
67 Neutral | $30.31B | 26.01 | 7.40% | 1.36% | 10.70% | -49.85% | |
65 Neutral | $444.59B | 30.97 | 15.88% | 1.70% | 8.35% | -35.14% | |
49 Neutral | $6.90B | -0.08 | -53.01% | 2.43% | 24.84% | -3.06% |
* Healthcare Sector Average
Performance Comparison
HQY
Healthequity
95.74
13.60
16.56%
CNC
Centene
58.57
-18.18
-23.69%
CI
Cigna
317.87
-20.26
-5.99%
HUM
Humana
250.20
-91.09
-26.69%
MOH
Molina Healthcare
324.81
-77.74
-19.31%
UNH
UnitedHealth
486.04
4.39
0.91%
Healthequity Earnings Call Summary
Earnings Call Date: Dec 9, 2024 | % Change Since: -5.21% | Next Earnings Date: Mar 18, 2025
Earnings Call Sentiment Positive
The earnings call reflected a generally positive outlook for HealthEquity, highlighting strong growth metrics and raised guidance. However, some operational challenges and potential churn in certain products were noted.Highlights
Strong Year-Over-Year Growth
HealthEquity reported double-digit growth across most key metrics, including a 21% increase in revenue, a 24% increase in adjusted EBITDA, and a 33% increase in HSA assets. Additionally, HSA members grew by 15%, driving total accounts up by 8%.
Raised FY '25 Guidance
The company raised its FY '25 guidance, expecting revenue between $1.185 billion and $1.195 billion, and adjusted EBITDA to be between $470 million and $480 million.
Significant Increase in HSA Investments
The number of HSA members who invest grew by 21%, driving invested assets up 58% to $13.6 billion.
Legislative Advancements
The bipartisan HOPE Act aims to expand access to personal portable health accounts for all Americans with ACA-qualified health insurance. The act has received endorsements from multiple influential organizations.
Lowlights
Operational Challenges
HealthEquity faced operational challenges, including a sophisticated fraud actor and the final wave of single card processor consolidation, leading to $8 million in excess service costs.
Potential Churn in CDB Products
The company anticipates potential healthy churn in its CDB products due to incremental price increases.
Company Guidance
During the HealthEquity Third Quarter 2025 Earnings Conference Call, the company provided guidance indicating strong financial performance and growth metrics. The executives reported a 21% year-over-year increase in revenue, with adjusted EBITDA up by 24% and Health Savings Account (HSA) assets rising by 33%. The number of HSA members grew by 15%, contributing to an 8% rise in total accounts, which reached 16.5 million. The company ended the quarter with $30 billion in HSA assets, a $7.4 billion increase year-over-year, and a 21% growth in HSA members who invest, driving invested assets up 58% to $13.6 billion. For fiscal year 2025, they raised guidance, expecting revenue between $1.185 billion and $1.195 billion and adjusted EBITDA between $470 million and $480 million. Initial guidance for fiscal year 2026 projects revenue of $1.275 billion to $1.295 billion, with adjusted EBITDA margins expanding to 41.5% to 42.5%.Healthequity Corporate Events
Business Operations and StrategyFinancial Disclosures
HealthEquity Projects Record Growth for Fiscal Year 2025
Positive
Jan 13, 2025
HealthEquity, Inc. announced record year-end estimates for its fiscal year ending January 31, 2025, showcasing strong growth in new HSAs from sales, custodial HSA asset growth, and total accounts. The company, leveraging an integrated network of over 200 partners, reported estimated HSAs of approximately 9.8 million and estimated HSA assets of $31 billion, indicating robust industry positioning and setting a foundation for continued growth in the coming fiscal year.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.