Here's Why You Should Retain HealthEquity Stock in Your Portfolio Now

HealthEquity, Inc. HQY has been gaining from its business model and strategy. The optimism, led by a solid third-quarter fiscal 2025 performance and strength in Health Savings Accounts (HSA), is expected to contribute further. However, stiff competition and data security issues are major concerns.In the past six months, the Zacks Rank #3 (Hold) company’s shares have risen 25.7% against a 12.9% decline of the industry. The S&P 500 has increased 4.6% during the said time frame.The renowned provider of technology-enabled services platforms for healthcare savings and spending decisions has a market capitalization of $8.72 billion. The company projects 24.6% growth for the next five years and expects to witness continued improvements in its business. HealthEquity’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 16.61%.Image Source: Zacks Investment ResearchReasons Favoring HQY’s GrowthBusiness Model and Strategy: We have a positive outlook on HealthEquity’s business model, which follows a business-to-business-to-consumer (B2B2C) distribution strategy. The company sees substantial opportunities to broaden its service offerings for existing clients. According to HealthEquity’s management, its diverse distribution network enables it to attract new clients and network partners. The sales team engages with enterprise and regional employers across various industries in the United States and potential network partners, including health plans, benefits administrators, and retirement plan record keepers.Strength in HSA: During the third 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 Oct. 31, 2024, rose 15% year over year. As of Oct. 31, 2024, the company reported 717,000 HSAs with investments. The figure rose 21% year over year. Total accounts, as of Oct. 31, 2024, also increased 7.8% on a year-over-year basis. This uptick included total HSAs and 7 million other consumer-directed benefits. Total HSA assets as of Oct. 31, 2024, rose 33% year over year. This included HSA cash and investments.Strong Q3 Results: HealthEquity saw solid top-and-bottom-line performances in the third quarter of fiscal 2025. Solid growth in HSAs also drove the top line. The solid uptick in total HSA assets in the reported quarter looks promising. The expansion of both margins also bodes well.The growing number of members choosing to invest in HSAs reflects a positive trend. Additionally, more members are selecting enhanced rates on HSA cash, leading to improved and more consistent custodial yields. HealthEquity has raised its revenue and earnings guidance for fiscal 2025 on its third-quarter earnings call, signaling confidence in its ongoing growth trajectory.Factors That May Offset HQY’s GainsData Security Issues: HealthEquity deals with high levels of sensitive personal data and information. Therefore, its ability to ensure the security of its technology platforms and, thus, sensitive customer and partner information is critical to its operations. Any form of security breach might result in loss of sensitive information, theft or loss of actual funds, litigation and performance of indemnity obligations to customers.  Any consequent legal claims or proceedings could disrupt HealthEquity’s operations, damage its reputation and cause a loss of confidence in the company’s products and services, thus adversely affecting its business.The company’s online platform is hosted from two data centers in Draper, UT and Austin, TX. Earlier this year, HealthEquity experienced a data breach that impacted around 4.3 million individuals. According to the data breach notice filed with the Maine Attorney General’s office, the breach occurred on March 9, 2024, and was discovered on June 26, 2024.Stiff Competition: HealthEquity faces stiff competition in the rapidly evolving and fragmented medical services market. The company’s success, to a substantial extent, depends on consumers' willingness to increase their use of HSAs and other CDBs, as well as its ability to increase engagement and demonstrate the value of its services to existing and potential clients.Estimate TrendHealthEquity has been witnessing a stable estimate revision trend for fiscal 2025. Over the past 60 days, the Zacks Consensus Estimate for earnings per share (EPS) has remained stable at $3.15.The Zacks Consensus Estimate for fourth-quarter fiscal 2025 revenues is pegged at $305.1 million, implying a 16.3% rise from the year-ago reported number. The consensus mark for EPS is pinned at 71 cents, implying a 12.7% improvement year over year.Key PicksSome better-ranked stocks in the broader medical space are Masimo MASI, Boston Scientific BSX and Cardinal Health CAH. At present, Masimo sports a Zacks Rank #1 (Strong Buy), whereas Boston Scientific and Cardinal Health carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.Masimo’s shares have rallied 30.1% in the past year. Estimates for MASI’s 2024 earnings per share (EPS) have increased 1.2% to $4.10 in the past 30 days. MASI’s earnings beat estimates in each of the trailing four quarters, the average surprise being 17.1%. In the last reported quarter, it posted an earnings surprise of 16.6%.Estimates for Boston Scientific’s 2025 EPS have jumped 2.9% to $2.85 in the past 30 days. Shares of the company have surged 56.7% in the past year compared with the industry’s growth of 12.5%. BSX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 8.25%. In the last reported quarter, it delivered an earnings surprise of 7.69%.Estimates for Cardinal Health’s fiscal 2025 EPS have increased 1.5% to $7.94 in the past 30 days. Shares of the company have gained 15.2% in the past year against the industry’s 4.1% decline. CAH’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 9.6%. In the last reported quarter, it delivered an earnings surprise of 10.3%.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Boston Scientific Corporation (BSX): Free Stock Analysis Report Cardinal Health, Inc. (CAH): Free Stock Analysis Report Masimo Corporation (MASI): Free Stock Analysis Report HealthEquity, Inc. (HQY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks