HealthEquity Inc (HQY, Financial) recently experienced a daily gain of 4.74% and a 3-month gain of 4.05%. However, it reported a Loss Per Share of 0.1. This raises an important question for potential investors: Is the stock fairly valued? This article will provide a comprehensive analysis of HealthEquity's valuation and financial health. Let's delve in.
Company Overview
HealthEquity Inc is a leading provider of solutions that empower consumers to make healthcare saving and spending decisions. The company's innovative technology enables customers to manage their tax-advantaged healthcare savings, compare treatment options and pricing, pay healthcare bills, receive benefit information, and earn wellness incentives. With a current stock price of $70.01 and a GF Value of $73.29, HealthEquity appears to be fairly valued.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. It provides a benchmark for the fair value at which the stock should ideally be traded. If the stock price is significantly above the GF Value, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value, its future return will likely be higher.
Given its current price of $70.01 per share, HealthEquity, with a market cap of $6 billion, appears to be fairly valued. As such, the long-term return of its stock is likely to align with the rate of its business growth.
Financial Strength Analysis
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's crucial to review a company's financial strength before deciding to buy shares. HealthEquity has a cash-to-debt ratio of 0.24, ranking it lower than 68.3% of 653 companies in the Healthcare Providers & Services industry. Based on this, GuruFocus ranks HealthEquity's financial strength as 6 out of 10, suggesting a fair balance sheet.
Profitability and Growth
Companies that have been consistently profitable over the long term offer less risk for investors. HealthEquity has been profitable 8 over the past 10 years. Over the past twelve months, the company had a revenue of $900.50 million and a Loss Per Share of $0.1. Its operating margin is 6.92%, which ranks better than 62.6% of 647 companies in the Healthcare Providers & Services industry. Overall, the profitability of HealthEquity is ranked 9 out of 10, which indicates strong profitability.
Growth is probably the most important factor in the valuation of a company. The 3-year average annual revenue growth rate of HealthEquity is 9.5%, ranking it better than 52.54% of 571 companies in the Healthcare Providers & Services industry. However, the 3-year average EBITDA growth rate is 4.1%, ranking it lower than 59.73% of 524 companies in the same industry.
ROIC vs WACC
Another method of determining the profitability of a company is to compare its return on invested capital (ROIC) to the weighted average cost of capital (WACC). For the past 12 months, HealthEquity's ROIC is 1.86, and its cost of capital is 5.7. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders.
Conclusion
In conclusion, the stock of HealthEquity appears to be fairly valued. The company's financial condition is fair, and its profitability is strong. However, its growth ranks lower than 59.73% of 524 companies in the Healthcare Providers & Services industry. To learn more about HealthEquity stock, you can check out its 30-Year Financials here.
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