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HealthEquity Inc. (HQY) stock soared in the pre-market trading session: here’s why

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HealthEquity Inc.(HQY) stock recently traded at $68 which is a 1.49% upward movement. The HQY stock previously closed at $67. HQY stock soared by 8.71% in the pre-market trading session, at the time of writing.

The pattern of positive movement of the HQY stock in the recent trading session comes with no new news.

How is HealthEquity a custodian of HSA?

HealthEquity is a healthcare company specifically established for being the trustee of all health savings. The designation is given by IRS to become a non-bank trustee and allows HealthEquity to become the custodian of health savings accounts. The function of custodian ad trustee is regardless of the financial institution for which the funds are deposited.

Since HealthEquity Inc. is associated and affiliated with IRS, there was looming expectations of how the stock will perform once President Biden would take the seat.

Review of HQY stock’s Q4 performance for FY 2021

The HQY stock had released its financial report on Q4 with earnings per share rising 7.69% year over year to $0.42. Thus EPS beats the estimate of $0.39. This year, the shares of HQY stock had also been able to easily surpass the S&P 500 index.

However, the revenue posted by HQY was $188,169,000 which is a 6.48% decrease compared to the previous year’s quarter from $201.2 million. However, the report was still higher than the average estimate of $185,360,000.

The Health Savings Account (HSA) provider had a total number of accounts of 5.8 million by the end of January 31, 2021. This is an increase of 8% year over year. The total active assets for HSA were $14.3 billion which is a 24% increment from last year.

One performance variable’s outlook which made the investors slightly hesitant in further investment is the segmental performance. Service revenues were down by 8.9% to a total of $111.3 million. Custodial revenue had dipped 1.6% to $48.6 million compared year over year. The interchange revenues fell 4.7% year over year to $28.3 million.

However, the HQY stock had a positive performance for its bottom-line. This is mainly due to the income tax benefit of $6.7 million and the interest expense had fallen in the fourth quarter than in the prior-year quarter.  The company at the end of fiscal fourth quarter had cash and cash equivalent amount of $328.8 million as compared to previous year fourth quarter where it was $191.7 million. Even due to the operating activities the total cash flow had totaled to $181.6 million in Q4 compared to $105 million an year ago.

What to expect of HQY stock in future?

Overall the HQY stock performance is solid as is the growth in its assets. But the segmental performance drop specifically the lowered adjusted operating margin as well as the gross margin is a basis of concern. This can prove challenging for the HQY company since it faces a lot of competition in the Medical Services market.

HealthEquity has given guidance for FY 2022 and reports a revenue projection of $750-$760 million. The adjusted earnings per share are given within $1.37-$1.42. Furthermore, if the pandemic eases down and companies start to hire more employees to put their business back on track, this employment rate rise could benefit HQY stock.

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