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Here's Why You Should Add HealthEquity (HQY) to Your Portfolio

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HealthEquity, Inc. (HQY - Free Report) has been gaining from its unique investment platform. The optimism led by a solid third-quarter fiscal 2024 performance and strength in Health Savings Accounts (HSA) are expected to contribute further. However, stiff competition and the possibility that integration of acquisitions may be unsuccessful are major downsides.

Over the past year, the Zacks Rank #1 (Strong Buy) stock has gained 26.1% against the 3.8% decline of the industry. The S&P 500 has witnessed 22.1% 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 $6.83 billion. The company projects 28.6% growth for the next five years and expects to witness continued improvements in its business. HealthEquity’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average earnings surprise being 16.5%.

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Let’s delve deeper.

Unique Investment Platform: We are optimistic about HealthEquity’s multiple cloud-based platforms, which are 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 Oct 31, 2023, rose 8.4% year over year. HealthEquity reported 592,000 HSAs with investments as of Oct 31, 2023, up 11.9% year over year. Total Accounts, as of Oct 31, 2023, were up 5.4% year over year. This uptick included total HSAs and 6.9 million other consumer-directed benefits (CDB). Total HSA assets at the end of Oct 31, 2023, were up 11.7% year over year. This included HSA cash and HSA investments.

Strong Q3 Results: HealthEquity saw solid top-line and bottom-line performances in third-quarter fiscal 2024. The top line benefited from robust contributions from the majority of its revenue sources. The expansion of both margins was also seen.


Integration of Acquisitions Maybe Unsuccessful: The success of HealthEquity’s recent acquisitions depends partly on its ability to realize the anticipated business opportunities by combining the operations of the acquired businesses with its business in an efficient and effective manner. The integration of HealthEquity’s acquisitions could take longer and be more costly than anticipated, and it could result in the disruption of its ongoing business and the acquired business, among others, and could harm its financial performance.

Stiff Competition: HealthEquity faces stiff competition in the Medical Services market, which is a rapidly evolving and fragmented one. 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.

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 6.9% north to $2.15.

The Zacks Consensus Estimate for fourth-quarter fiscal 2024 revenues is pegged at $255.7 million, suggesting a 9.4% rise from the year-ago reported number.

Other Key Picks

A few other top-ranked stocks in the broader medical space are DaVita Inc. (DVA - Free Report) , Merit Medical Systems, Inc. (MMSI - Free Report) and Integer Holdings Corporation (ITGR - Free Report) .

DaVita, carrying a Zacks Rank #2 (Buy), has an estimated long-term growth rate of 17.3%. DVA’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 36.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.

DaVita’s shares have gained 31.2% compared with the industry’s 7.8% rise in the past year.

Merit Medical, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 11.3%. MMSI’s earnings surpassed estimates in each of the trailing four quarters, with the average being 14.4%.

Merit Medical has gained 12.9% compared with the industry’s 10.6% rise in the past year.

Integer Holdings, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 15%. ITGR’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 11.9%.

Integer Holdings’ shares have rallied 46.6% compared with the industry’s 4.7% rise in the past year.

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