HealthEquity Inc. (HQY) once again blew out the numbers when it reported its Q1 FY19 results with the stock following suit breaking out above $80 per share to an all-time high. I first profiled HealthEquity when it was trading in the sub $40 range as a play on a secular growth trend in the healthcare space regardless of legislative actions, drug pricing debate or rising insurance costs. HealthEquity is not an insurance company thus does not possess any liability for coverage in any capacity nor does the company play any role in the pharmaceutical supply chain.
HealthEquity is at the center of a healthcare paradigm shift where consumers are taking control of their healthcare dollars via leveraging Health Savings Accounts (HSAs). HealthEquity manages funds allocated for medical, dental and vision expenses that are deducted on a pre-tax basis and deposited into a dedicated HSA account. HealthEquity manages $6.9 billion in assets across 3.5 million accounts against a potential market maturity of $1 trillion in assets across 50-60 million accounts.
HealthEquity has posted annual revenue growth of 42%, 44%, 41% and 29% over fiscal years 2015, 2016, 2017 and 2018. The durability of this growth has a long runway due to the secular growth in the HSA market. The company is sitting on largely untapped revenue sources where the vast majority of account holders have yet to invest any HSA money in investment offerings. Expanding margins for greater profitability is also unfolding as the older the account, the greater the gross margins hence gross margins increased 269 basis points in the recent quarter. HealthEquity is currently sitting on a healthy balance sheet with ~$270 million in cash and cash equivalents with zero debt. HealthEquity is posting accelerating revenue, cash flow, margin expansion and income growth with a strong balance sheet. I feel that HealthEquity will continue to post strong growth as it services the double-digit HSA growth market and manages more assets, accounts, and investments within these accounts. HealthEquity may be a great long-term investment in the healthcare space that’s independent of the health insurances, pharmaceutical supply chain companies, drug makers or pharmacies. Continue reading "HealthEquity - Breaking Out Above $80"