Here's Why You Should Add HealthEquity Stock to Your Portfolio Now

In This Article:

HealthEquity, Inc. HQY has been gaining from its business model and strategy. The optimism, led by a solid second-quarter fiscal 2025 performance and strength in Health Savings Accounts (“HSA"), is expected to contribute further. However, stiff competition and the possibility of the integration of acquisitions being unsuccessful are major downsides.

So far this year, the Zacks Rank #3 (Hold) stock has gained 43% against 5.6% decline of the industry.The S&P 500 has increased 26% during the said time frame.

The renowned provider of technology-enabled services platforms for healthcare savings and spending decisions has a market capitalization of $8.75 billion. The company projects 28.2% growth for the next five years and expects to witness continued improvements in its business. HealthEquity’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 19.76%.

Zacks Investment Research
Zacks Investment Research


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Let’s delve deeper.

Business Model and Strategy: We are optimistic about HealthEquity’s business model, which is based on a business-to-business-to-consumer distribution strategy. The company believes that there are significant opportunities to expand the scope of services that it provides to its current clients. Per HealthEquity’s management, it has a diverse distribution footprint to attract new clients and network partners. Its sales force calls on enterprise and regional employers in industries across the United States as well as potential Network Partners from among health plans, benefits administrators and retirement plan record keepers.

Strength in HSA: During the second quarter of fiscal 2025, despite inflationary challenges, HealthEquity experienced solid growth in HSA balances, driven by a significant increase in invested assets, which now represent a larger portion of total HSA assets.HealthEquity’s total number of HSAs, as of July 31, 2024, rose 15% year over year. The company reported 711,000 HSAs with investments as of July 31, 2024, up 24% year over year. Total accounts, as of July 31, 2024, rose 9% year over year. This uptick included total HSAs and 6.9 million other consumer-directed benefits (CDB). Total HSA assets at the end of July 31, 2024, rose 27% year over year. This included HSA cash and investments.

Strong Q2 Results: HealthEquity saw solid top and bottom-line performances in second-quarter fiscal 2025. Solid growth in HSAs also drove the top line. The solid uptick in total HSA assets in the reported quarter is promising. The expansion of both margins also bodes well.

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