HealthEquity, Inc. (NASDAQ:HQY): A Bull Case Theory

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HQY provides technology-enabled work platforms to individuals for making wellness redeeming and spending decisions, paying healthcare bills, receiving personalized payment information, earning wellness incentives, increasing their savings, and making concern choices. It is 1 of the starring Health Savings Account (HSA) providers.

The HSA plus basal has witnessed mid-teens maturation implicit the years but is expected to connection a much unchangeable mid to precocious single-digit complaint successful the future. The accidental inactive exists successful a seemingly mature marketplace wherever lone 37 cardinal of the 110 cardinal households person HSA accounts. HQY has been an outperformer successful this segment, capturing 27% of the relationship share. The fig of HSA accounts for HQY grew by 13%, overmuch higher than the mid-single-digit maturation of the industry.

The existing Republican authorities is besides expected to framework regulations that are expected to turn the HSA corpus successful a bid to “denationalize” healthcare. Modifications to the HOPE Act should marque much radical eligible for HSA accounts. These see veterans astatine Veterans Affairs facilities and aged radical availing Medicare done their Social Security benefits. The bounds for publication towards HSA is besides expected to emergence from $4.15k to $7.5k per person. There whitethorn besides beryllium an enlargement to the services for which funds successful the HSA tin beryllium used. Direct Primary Care, ceremonial expenses and gym rank tin beryllium brought nether the sum of HSA.

HQY has been capable to turn the currency equilibrium astatine 13-14% successful the past 5 years and has deposited these funds successful 5-year word deposits oregon CDs. Lately, the funds are invested successful annuities, allowing HQY to gain the 5-year Treasury complaint + 75 bps compared to the 5-year Treasury complaint + 10 bps erstwhile it was held successful banks. The existent premix is 45:55 successful favour of annuities expected to alteration to 15:85 successful the adjacent fewer years. This conversion successful the portfolio should summation EPS by 65% successful the adjacent 5 years. While the statement EPS for 2027 is $4.76, HQY tin easy execute an EPS of $6 with its existent maturation complaint and portfolio reconstruction. This offers a P/E of ~14x astatine its existent price, making it an attractively priced stock.

While we admit the imaginable of HQY arsenic an investment, our condemnation lies successful the content that immoderate AI stocks clasp greater committedness for delivering higher returns, and doing truthful wrong a shorter clip frame. If you are looking for an AI banal that is much promising than HQY but that trades astatine little than 5 times its earnings, cheque retired our study astir the cheapest AI stock.