HealthEquity (NASDAQ:HQY) has seen notable gains in the stock market, with a 3-month increase of 13.6% and a gain of 4.63%. This article provides an in-depth analysis of HealthEquity’s valuation and offers insights for potential investors.
HealthEquity Inc is a leading provider of solutions that empower consumers to make informed healthcare saving and spending decisions. The company’s innovative technology allows customers to track their tax-advantaged healthcare savings, compare treatment options and pricing, pay healthcare bills, and receive benefit information and wellness incentives. HealthEquity primarily partners with health plans and employers, acting as the custodian of health savings accounts (HSAs). The company also offers reimbursement arrangements, healthcare incentives, and investment advisory services.
To determine the fair value of HealthEquity, an examination of its GF Value is conducted. The GF Value is a measure of a stock’s intrinsic value, calculated based on historical multiples, past returns and growth, and future business performance estimates. According to the GF Value, HealthEquity’s current stock price of $70.95 aligns closely with the estimated fair value, indicating a balanced valuation. This suggests that the long-term return of HealthEquity’s stock is likely to be in line with its business growth rate.
Examining the financial strength of a company is crucial before making investment decisions. HealthEquity has a cash-to-debt ratio of 0.31, ranking it lower than 65.24% of companies in the Healthcare Providers & Services industry. However, its financial strength is rated as fair, with a score of 6 out of 10. In terms of profitability, HealthEquity has been profitable in 8 out of the past 10 years, with a revenue of $937.90 million and an EPS of $0.15 in the last twelve months. Its operating margin of 8.93% ranks better than 69.62% of companies in the industry. The overall profitability rating is 9 out of 10, indicating strong profitability.
When evaluating growth, it is important to note that HealthEquity’s average annual revenue growth is 9.5%, ranking better than 53.05% of companies in the industry. However, its 3-year average EBITDA growth is 4.1%, ranking worse than 59.85% of companies in the same industry.
Profitability can also be assessed by comparing the company’s return on invested capital (ROIC) to its weighted average cost of capital (WACC). HealthEquity’s ROIC is 2.14, while its WACC is 5.83. If the ROIC exceeds the WACC, it indicates that the company is generating value for its shareholders.
In conclusion, HealthEquity’s stock appears to be fairly valued. The company has a fair financial condition and strong profitability. However, its growth ranks lower than the industry average. Further research is recommended for potential investors considering HealthEquity.
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