Reasons to Add HealthEquity (HQY) Stock to Your Portfolio
HealthEquity, Inc. HQY has been gaining from its unique investment platform. The optimism led by a solid first-quarter fiscal 2024 performance and strength in Health Savings Accounts (HSA) are expected to contribute further. However, data security issues and a tough competitive landscape are major downsides.
Over the past year, the Zacks Rank #1 (Strong Buy) stock has gained 6.5% against the 11.5% decline of the industry. The S&P 500 has witnessed 14.4% growth in the said time frame.
The renowned provider of technology-enabled services platforms for healthcare savings and spending decisions has a market capitalization of $5.36 billion. The company projects 22% growth for the next five years and expects to witness continued improvements in its business. HealthEquity’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed once, the average earnings surprise being 9.1%.
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Let’s delve deeper.
Unique Investment Platform: We are optimistic about HealthEquity’s multiple cloud-based platforms, accessed by its members online via a desktop or mobile device. Individuals can make health-saving and spending decisions and pay healthcare bills, among other activities, via these platforms. These platforms provide users access to services HealthEquity provides as well as services provided by third parties selected by HealthEquity or its Network Partners. Among other features, HealthEquity’s HSA platform has the capability to provide users with medical bills upon adjudication by a health plan, including details such as the amount paid by insurance.
Strength in HSA: HealthEquity’s total number of HSAs, as of Apr 30, 2023, rose 9.3% year over year. HealthEquity reported 556,000 HSAs with investments as of Apr 30, 2023, up 9.9% year over year. Total Accounts, as of Apr 30, 2023, were up 3.8% year over year. This uptick included total HSAs and 6.9 million other consumer-directed benefits (CDBs). Total HSA assets were up 10.1% year over year at the end of Apr 30, 2023.
Strong Q1 Results: HealthEquity saw solid top-line and bottom-line performances in first-quarter fiscal 2024. The top line benefited from robust contributions from all its revenue sources. The expansion of both margins was also seen.
Downsides
Stiff Competition: HealthEquity faces stiff competition in the Medical Services market, which is rapidly evolving and fragmented. The company’s success depends to a substantial extent on the willingness of consumers to increase their use of HSAs and other CDBs, and its ability to increase engagement and demonstrate the value of its services to existing and potential clients, Network Partners and members.
Data Security Issues: HealthEquity deals with a high level of sensitive personal data and information. Any security breaches might result in the loss of sensitive information, theft or loss of actual funds, litigation or indemnity obligations to the customers. The company’s ability to ensure the security of its technology platforms and, thus, sensitive customer and partner information is critical to its operations.
Estimate Trend
HealthEquity has been witnessing a positive estimate revision trend for fiscal 2024. Over the past 90 days, the Zacks Consensus Estimate for its earnings per share has moved 9.7% north to $1.92.
The Zacks Consensus Estimate for second-quarter fiscal 2024 revenues is pegged at $238.8 million, suggesting a 15.9% rise from the year-ago reported number.
Other Key Picks
A few other top-ranked stocks in the broader medical space are AmerisourceBergen Corporation ABC, Becton, Dickinson and Company BDX, popularly known as BD, and Boston Scientific Corporation BSX.
AmerisourceBergen, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 8.9%. ABC’s earnings surpassed estimates in all the trailing four quarters, with an average surprise of 3.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.
AmerisourceBergen has gained 33.6% compared with the industry’s 17.8% rise over the past year.
BD, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 10.1%. BDX’s earnings surpassed estimates in all the trailing four quarters, with an average of 5.8%.
BD has gained 9.2% compared with the industry’s 17.8% rise over the past year.
Boston Scientific, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11.5%. BSX’s earnings surpassed estimates in two of the trailing four quarters and missed in the other two, the average surprise being 1.9%.
Boston Scientific has gained 39.9% compared with the industry’s 4.7% rise over the past year.
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Boston Scientific Corporation (BSX) : Free Stock Analysis Report
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HealthEquity, Inc. (HQY) : Free Stock Analysis Report
