HealthEquity, Inc. HQY is likely to gain from solid prospects in Health Savings Account (“HSA") business.
Shares of this company have rallied 11% against the industry’s 11.1% decline in a year’s time. Meanwhile, the S&P 500 index has risen 23.8% over the same time frame.
This $5-billion health-care account management company currently has a Zacks Rank #2 (Buy). HealthEquity’s earnings are expected to grow 25% in the next five years. Also, the company has a trailing four-quarter positive earnings surprise of 46.4%, on average.
The stock also has a Momentum Score of A. Our research shows that stocks with a Momentum Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, are better picks than most.
Let’s take a closer look at the factors working in favor of the company right now.
Strength in HSA & Guidance
HealthEquity is an Internal Revenue Service approved non-bank custodian of HSA, which is a medical savings account available to taxpayers in the United States.
As of Oct 31, 2019, the total number of HSAs for which HealthEquity served as a non-bank custodian was 5 million.
HealthEquity clinched the top position in the HSA industry through its first-mover advantage, focus on innovation and differentiated capabilities.
The company’s market share (measured by custodial assets) has literally tripled from 4% in December 2010 to 13% in December 2018, per the 2018 Devenir HSA Research Report. Currently, HealthEquity is the third-largest HSA custodian in terms of market share.
HealthEquity, Inc. Price and Consensus
HealthEquity, Inc. price-consensus-chart | HealthEquity, Inc. Quote
Devenir further suggests that the HSA market will reach a worth of $88 billion in HSA assets held over by 30 million accounts by 2021-end.
Driven by the solid aspects, the company recently raised its fiscal 2020 revenue expectations.
Notably, HealthEquity now expects revenues between $520 million and $526 million, much higher than the earlier projected range of $341-$347 million.
Adjusted net income is projected between $101 million and $105 million, much above the earlier stated range of $76-$80 million.
Adjusted earnings per share (EPS) for fiscal 2020 are expected within $1.46-$1.52, compared to $1.10-$1.16 issued earlier.
For fiscal 2020, the Zacks Consensus Estimate for revenues is pegged at $524.1 million, suggesting a year-over-year upside of 82.5%. For adjusted EPS, the same stands at $1.50 per share, indicating growth of 26.1% from the year-ago reported figure.
Other Stocks to Consider
Other top-ranked stocks in the broader medical space are Cerner Corporation CERN, Intuitive Surgical ISRG and DexCom DXCM, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Cerner’s long-term earnings growth rate is estimated at 13.6%.
Intuitive Surgical’s long-term earnings growth rate is projected at 11.8%.
DexCom’s fourth-quarter earnings growth rate is estimated at 31.5%.
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Cerner Corporation (CERN) : Free Stock Analysis Report
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HealthEquity, Inc. (HQY) : Free Stock Analysis Report
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