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

HealthEquity, Inc. HQY has been gaining from its business model and strategy. The optimism, led by a decent fourth-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 year-to-date period, the Zacks Rank #2 (Buy) company’s shares have risen 5.8% against a 4.8% decline of the industry. The S&P 500 has increased 0.2% 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 20.3% growth for 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 12.78%.

Reasons Favoring HQY’s Growth

Expansion of Health Savings Accounts: HealthEquity has experienced significant growth in its HSA offerings. As of Jan. 31, 2025, the company reported 9.9 million HSAs, marking a 14% increase year over year. Additionally, total HSA assets reached $32.1 billion, a 27% rise from the previous year. The number of HSAs with investments grew 23%, contributing to a 44% increase in invested assets to $14.7 billion. The company also achieved a milestone by opening 471,000 new HSAs in the fiscal fourth quarter alone, bringing the total to 1 million new HSAs for the fiscal year.

Unique Investment Platform: HealthEquity offers multiple cloud-based platforms accessed by its members online via a desktop or mobile device. Individuals can make health-saving and spending decisions and pay healthcare bills, among other activities, via these platforms. These platforms provide users access to the services HealthEquity provides, as well as services provided by third parties selected by HealthEquity or by its Network Partners. Among other features, HealthEquity’s HSA platform can provide users with medical bills upon adjudication by a health plan, including details such as the amount paid by insurance.

Decent Q4 Results: In the fourth quarter of fiscal 2025, HQY reported a 19% year-over-year increase in revenues, reaching $311.8 million, driven by growth across service, custodial, and interchange revenue streams. The company’s bottom line also improved 9.5% on a year-over-year basis. Solid growth in HSAs also drove the top line. The solid uptick in total HSA assets in the reported quarter is promising. Looking ahead, HealthEquity projects fiscal 2026 revenues between $1.28 billion and $1.305 billion and earnings per share (EPS) between $3.57 and $3.74, indicating continued growth despite near-term challenges.

A Factor That May Offset HQY’s Gains

Data Security Issues: HealthEquity handles highly sensitive personal and financial data, making platform security critical to its operations. A breach could lead to data loss, theft of funds, legal liabilities, and reputational harm, potentially disrupting business and eroding customer trust. The company’s platform is hosted across data centers in Draper, UT, and Austin, TX. Notably, HealthEquity experienced a significant data breach on March 9, 2024, which was discovered on June 26, 2024, impacting approximately 4.3 million individuals.

This incident underscores the operational and reputational risks tied to cybersecurity, with potential legal and financial consequences that could adversely affect HealthEquity’s performance.

Estimate Trend

HealthEquity has been witnessing a negative estimate revision trend for fiscal 2026. Over the past 60 days, the Zacks Consensus Estimate for EPS has moved 3 cents downwards to $3.60.

The Zacks Consensus Estimate for first-quarter fiscal 2026 revenues is pegged at $321.1 million, implying a 11.7% rise from the year-ago reported number. The consensus mark for EPS is pinned at 81 cents, implying a 1.3% improvement year over year.

Key Picks

Some other top-ranked stocks in the broader medical space that have announced quarterly results are CVS Health Corporation CVS, Integer Holdings Corporation ITGR and AngioDynamics ANGO.

CVS Health, carrying a Zacks Rank of 2, reported first-quarter 2025 adjusted EPS of $2.25, beating the Zacks Consensus Estimate by 31.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Revenues of $94.59 billion outpaced the consensus mark by 1.8%. CVS Health has a long-term estimated growth rate of 11.4%. Its earnings surpassed estimates in each of the trailing four quarters, with an average surprise of 18.1%.

Integer Holdings reported first-quarter 2025 adjusted EPS of $1.31, beating the Zacks Consensus Estimate by 3.2%. Revenues of $437.4 million surpassed the Zacks Consensus Estimate by 1.3%. It currently sports a Zacks Rank of 1.

Integer Holdings has a long-term estimated growth rate of 18.4%. ITGR’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 2.8%.

AngioDynamics, currently sporting a Zacks Rank #1, reported a third-quarter fiscal 2025 adjusted EPS of 3 cents against the Zacks Consensus Estimate of a 13-cent loss. Revenues of $72 million beat the Zacks Consensus Estimate by 2%.

ANGO has an estimated fiscal 2026 earnings growth rate of 27.8% compared with the S&P 500 Composite’s 10.5% growth. AngioDynamics’ earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 70.9%.

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

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