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3 Reasons to Retain HealthEquity (HQY) Stock in Your Portfolio

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HealthEquity, Inc. (HQY - Free Report) is well-poised for growth in the coming quarters, courtesy of its unique investment platform. The optimism led by a solid fourth-quarter fiscal 2023 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 #3 (Hold) stock has lost 14.9% compared with the 27.8% decline of the industry and a 4.3% fall of the S&P 500.

The renowned provider of technology-enabled services platforms for healthcare savings and spending decisions has a market capitalization of $4.86 billion. The company projects 21.1% growth for the next five years and expects to witness continued improvements in its business. HealthEquity’s earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters and missed the same in the other two, the average earnings surprise being 2.7%.

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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 Jan 31, 2023 rose 10.8% year over year. Total Accounts, as of Jan 31, 2023, were up 3.6% year over year. This uptick included total HSAs and 6.9 million other consumer-directed benefits. Total Active HSA assets were up 12.9% year over year at the end of Jan 31, 2023.

Strong Q4 Results: HealthEquity saw solid top-line and bottom-line performances in the reported quarter. The top line benefited from robust contributions from all its revenue sources. The expansion of both margins was also seen.


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 60 days, the Zacks Consensus Estimate for its earnings per share has moved 0.6% north to $1.75.

The Zacks Consensus Estimate for first-quarter fiscal 2024 revenues is pegged at $239.9 million, suggesting a 16.6% rise from the year-ago reported number.

This compares to our fiscal first-quarter revenue estimate of $237.9 million, suggesting a 15.6% improvement from the year-ago quarter’s reported number.

Key Picks

Some better-ranked stocks in the broader medical space are Avanos Medical, Inc. (AVNS - Free Report) , Henry Schein, Inc. (HSIC - Free Report) and Masimo Corporation (MASI - Free Report) .

Avanos, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 1.8% for 2023. AVNS’ earnings surpassed estimates in all the trailing four quarters, the average beat being 11%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Avanos has lost 1.2% compared with the industry’s 5.2% decline over the past year.

Henry Schein, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 8.1%. HSIC’s earnings surpassed estimates in three of the trailing four quarters and matched the same in the other, the average beat being 2.9%.

Henry Schein has lost 3.8% against the industry’s 2.5% rise over the past year.

Masimo, sporting a Zacks Rank #1 at present, has an estimated growth rate of 3.5% for 2023. MASI’s earnings surpassed estimates in all the trailing four quarters, the average beat being 9%.

Masimo has gained 58.4% against the industry’s 5.2% decline over the past year.

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