HealthEquity at 52-Week High on Strong Q2 Results, Outlook
Shares of HealthEquity Inc. HQY rallied to a new 52-week high of $35.78 on Nov 11 and closed a tad bit lower at $34.96. This represents a strong one-year return of approximately 63.4%, much better than the S&P 500’s return of 1.8% over the same period.
The bullish trend primarily reflects strong revenue growth in the second quarter of fiscal 2016, solid growth projections for fiscal 2017 and continuing market share gain. This Zacks Rank #1 (Strong Buy) stock has a market cap of $1.97 billion and a long-term expected earnings growth rate of 32.50%.
Growth Catalysts
HealthEquity reported impressive second-quarter fiscal 2016 results. Earnings of 8 cents per share were in line with the Zacks Consensus Estimate and surged 33.3% on a year-over-year basis. The upside was driven by a 46% increase in revenues, which totaled $30.5 million, which again beat the Zacks Consensus Estimate of $30 million.
The growth in total number of HAS members – for which the company serves as a non-bank custodian – was strong. At the end of the quarter, the tally increased 45% year over year to 1.5 million. Total assets under management (AUM) rose 47% year over year to $2.6 billion.
Based on the results, HealthEquity raised its fiscal 2016 revenue guidance to the $120–$124 million range. We believe HealthEquity is wining market share and the growing customer base is significantly positive for the company’s top line. Higher retention rate and growing engagement will further drive customer base.
The recent acquisition of The Bancorp’s TBBK Health Savings Account (HSA) that includes almost 170,000 accounts totaling more than $400 million deposits further enhances HealthEquity’s opportunity to gain market share. We believe that new products like “CompareMyHSA.com” that enables consumers to compare health plan details will help the company gain customers. This will also boost top-line growth going forward.
Estimate Revisions
The Zacks Consensus Estimate for fiscal 2016 remained steady at 30 cents over the last 30 days. However, estimates for fiscal 2017 climbed up 3 cents to 46 cents over the same period.
Zacks Rank & Key Picks
AMN Healthcare Services AHS and PRA Health Sciences PRAH are two other stocks that have the same Zacks Rank as HealthEquity.
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AMN HLTHCR SVCS (AHS): Free Stock Analysis Report
BANCORP BNK/THE (TBBK): Free Stock Analysis Report
PRA HEALTH SCI (PRAH): Free Stock Analysis Report
HEALTHEQUITY (HQY): Free Stock Analysis Report
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