Reasons to Add HealthEquity Stock to Your Portfolio for Now

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 (HSAs), is expected to contribute further. However, data security threats are major concerns.

In the past six months, the Zacks Rank #2 (Buy) company’s shares have risen 9.5% compared with 3.8% growth of the industry. The S&P 500 has increased 28.3% during the said time frame.

The renowned provider of technology-enabled services platforms for healthcare savings and spending decisions has a market capitalization of $8.1 billion. The company projects 21.7% growth over the next five years and expects to witness continued improvements in its business. HealthEquity’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed once, the average surprise being 11.1%.

Reasons Favoring HQY’s Growth

Expansion of Health Savings Accounts: HealthEquity has experienced significant growth in its HSA offerings. As of July 31, 2025, the total number of Health Savings Accounts (HSAs) for which HealthEquity served as a non-bank custodian was 10 million, up 6% year over year. HealthEquity reported 782,000 HSAs with investments as of July 31, 2025, up 10% year over year. Total accounts, as of April 30, 2025, were 17.1 million. This uptick included total HSAs and 7.2 million CDBs.

Total HSA assets were $33.1 billion at the end of July 31, 2025, up 12% year over year. This included $17 billion of HSA cash and $16.1 billion of HSA investments. Deposits held on behalf of HealthEquity’s clients to facilitate the administration of its CDBs, from which the company generates custodial revenues, were $0.8 billion as of July 31, 2025.

AI & Digital Innovation Drive Scalable Efficiency: HQY is making rapid progress in its AI and mobile-first transformation, already seeing tangible benefits from its AI-powered claims adjudication system, which processes reimbursements faster, cuts servicing costs, and boosts member satisfaction. The company is piloting Agentic AI in voice channels to automate interactions and reduce wait times, while the full cloud migration of its V5 platform has significantly improved response speed, stability, and reliability.

Alongside this, HQY’s secure mobile app and passkey authentication are enhancing security and engagement, with features like app-based multifactor authentication, digital wallet integration and mobile investing deepening member involvement and driving higher transaction volumes. Together, these initiatives are strengthening HQY’s efficiency, customer loyalty and long-term margin potential.

Strong Q2 Results: HealthEquity exited second-quarter fiscal 2026 with better-than-expected results. The company witnessed solid top-line and bottom-line performances in the reported quarter. Solid growth in HSAs also drove the top line. The solid uptick in total HSA assets in the reported quarter is promising. Significant improvements in operating and gross margins also bode well.

A Factor That May Offset HQY’s Gains

Data Security Threats: HealthEquity deals with a high level of sensitive personal and financial data, making the security of its technology platforms critical to operations. While the company has made progress, fraud remains an ongoing cost and operational focus. In fiscal second-quarter 2026, it still reimbursed members approximately $1.2 million for fraud-related incidents, though overall fraud-related service costs declined sequentially.

Despite sequential declines in fraud incidents throughout 2025, the risk remains that any material breach could lead to loss of sensitive information, theft or loss of actual funds, litigation, indemnity obligations, and reputational harm. Such outcomes could disrupt operations and erode client confidence, adversely impacting HealthEquity’s business.

Estimate Trend

HealthEquity has been witnessing a positive estimate revision trend for fiscal 2026. Over the past 60 days, the Zacks Consensus Estimate for earnings per share (EPS) has moved 13 cents upward to $3.86.

The Zacks Consensus Estimate for third-quarter fiscal 2026 revenues is pegged at $319.9 million, implying a 6.5% rise from the year-ago reported number. The consensus mark for fiscal third-quarter EPS is pinned at 90 cents, implying a 15.9% improvement year over year.

Other Key Picks

Some other top-ranked stocks in the broader medical space are Masimo MASI, Merit Medical System MMSI and West Pharmaceutical Services WST. Each stock presently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Masimo shares have lost 10.4% so far this year compared with the industry’s 7.4% decline. Estimates for the company’s 2025 earnings per share have increased 1.3% to $5.30 in the past 30 days.

MASI’s earnings beat estimates in each of the trailing four quarters, the average surprise being 13.8%. In the last reported quarter, it posted an earnings surprise of 8.1%.

Estimates for Merit Medical’s 2025 earnings per share have increased 0.8% to $3.63 in the past 60 days. Shares of the company have lost 13.8% so far this year against the industry’s 1.1% growth.

MMSI’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 12.92%. In the last reported quarter, it delivered an earnings surprise of 17.44%.

Estimates for West Pharmaceutical’s 2025 earnings per share have increased 1.2% to $6.74 in the past 60 days. Shares of the company have lost 18.2% so far this year against the industry’s 1% growth.

WST’s earnings beat estimates in each of the trailing four quarters, the average surprise being 16.81%. In the last reported quarter, it delivered an earnings surprise of 21.85%.

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This article originally published on Zacks Investment Research (zacks.com).

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