After looking at HealthEquity Inc’s (NASDAQ:HQY) latest earnings announcement (30 April 2018), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether HealthEquity’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. See our latest analysis for HealthEquity
Did HQY’s recent earnings growth beat the long-term trend and the industry?
For the most up-to-date info, I use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This blend allows me to assess various companies in a uniform manner using the latest information. For HealthEquity, its most recent earnings (trailing twelve month) is US$55.91M, which, against the prior year’s figure, has risen by a significant 72.93%. Given that these values are relatively nearsighted, I have determined an annualized five-year value for HQY’s net income, which stands at US$20.11M This suggests that, generally, HealthEquity has been able to gradually improve its net income over the past couple of years as well.
What’s enabled this growth? Let’s see if it is only attributable to industry tailwinds, or if HealthEquity has experienced some company-specific growth. In the last couple of years, HealthEquity grew its bottom line faster than revenue by efficiently controlling its costs. This resulted in a margin expansion and profitability over time. Scanning growth from a sector-level, the US healthcare industry has been growing, albeit, at a subdued single-digit rate of 9.96% in the prior year, and a substantial 10.53% over the past five. This suggests that whatever tailwind the industry is profiting from, HealthEquity is capable of leveraging this to its advantage.
What does this mean?
HealthEquity’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that have performed well in the past, such as HealthEquity gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research HealthEquity to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for HQY’s future growth? Take a look at our free research report of analyst consensus for HQY’s outlook.
- Financial Health: Is HQY’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 30 April 2018. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.