HealthEquity is the IBD Stock Of The Day for Tuesday after climbing back from a yearlong skid in 2021. HQY stock is up 55% so far this year, showing particular strength over the last five weeks as the overall market has undercut its prior lows.
That strength held firmly on Tuesday, with HQY shares rising 5.9% on a 128% increase in trading volume.
The Utah-based health savings account administrator is one of the largest providers of health savings accounts and related services. It recorded $205.7 million in revenue for the first quarter, up 12% year over year. The bulk of the company's earnings come from its service revenue, which was $104.3 million for the quarter due to the increased number of HSA accounts. Its custodial revenue grew 26% from the same period last year to $59.4 million in Q1. Interchange revenue, generated by fees for using HealthEquity account-related debit cards, was up 21% from Q1 2021, totaling $42 million for the quarter.
Building Wealth From Health
HealthEquity reported 159,000 new HSA accounts launched during the first quarter of the year, compared to 115,000 during the same period last year. As of April 30, HealthEquity has 14.5 million accounts total, with just under half those being consumer-directed benefits (CBDs) accounts. Its total HSA assets are valued at $20.3 billion, up 36% year over year.
In March, the company acquired the Health Savings Administrators' HSA portfolio for $60 million, which included 87,000 HSAs and bolstered its assets by $1.3 billion.
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"We started fiscal year 2023 with record new HSA sales for a first quarter and overall highs for Total HSA Assets, HSAs, total accounts, and quarterly revenue," said CEO Jon Kessler during the company's June 6 earnings report. "We are off to a fast start for the fiscal year and are well-positioned to outpace the market and deliver strong revenue and adjusted EBITDA in fiscal 2023."
HealthEquity expects to generate between $827 million and $837 million in revenue for the fiscal year, and record a net loss between $43 million and $51 million. It predicts its EPS to range from $1.23 to $1.32 per diluted share. The midpoint is below analysts' projected EPS of $1.33 per diluted share, according to FactSet. Analysts consensus for HealthEquity currently is a buy rating, with a price target of $77.17 per share.
HQY Stock Vs. A Grungy Market
HQY stock is breaking out from an eight-week cup-with-handle base. The buy point is at 72.80, according to MarketSmith chart analysis. The breakout has some added reinforcement from the stock's rebound from support at its 10-week moving average, just ahead of the breakout.
But moving into new positions, no matter how attractive the stocks might be, is not the way to play a stock when the market is in a correction and grinding away at new lows.
Savvy investors are currently building watchlists of leading stocks with promising charts. Relative strength lines are key indicators in helping to build those lists. HealthEquity's RS line is angling sharply higher to new highs.
It currently boasts a Relative Strength Rating of 95 out of a possible 99. HQY stock also has a solid IBD Composite Rating of 84. The Comp Rating combines a number of key fundamental and technical metrics. HealthEquity's Composite Score is the 6th highest in its industry group.
