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Category: Stock Market and Health Equity
Date: 17 March 2020 Stock Price: $44.15 We take a look at the 4th quarter 2019 earnings report of Health Equity an administrator of health savings accounts and other consumer directed benefits of more than 12 million accounts. The stock plunged following the release of their latest earnings report and general negative market sentiment.
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About Health Equity
HealthEquity administers Health Savings Accounts (HSAs) and other consumer-directed benefits for our more than 12 million accounts in partnership with employers, benefits advisors, and health and retirement plan providers who share our mission to connect health and wealth and value our culture of remarkable “Purple” service
Overview of Health Equity's 4th quarter 2019 earnings report
Data below refers to the latest quarters data unless specified otherwise:
- Total Revenue: $201.200 million (up from $75.777 million for the same quarter of the previous year)
- Revenue increased by 165.5% over the last 12 months
- Cost of revenue: $87.519 million (up from $31.332 million for the same quarter of the previous year)
- Cost of sales increased by 179.3% over the last 12 months
- Margin pressure for Health Equity as their total revenues increased at a slower rate than their cost of revenue
- Net loss: $190k (down from a profit of $13.119 million for the same quarter of the previous year)
- Diluted earnings per share: $0.00 (down from $0.21 for the same quarter of the previous year)
- PE ratio of Health Equity: 76
- Diluted number of shares in issue: 70.880 million (up from 63.723 million for the same quarter of the previous year)
- Cash and cash equivalents: $192.716 million
- Cash and cash equivalents per share: $2.72
- Cash and cash equivalents makes up 6.15% of Health Equity's market capital
- Cash and cash equivalents makes up 7.47% of Health Equity's total assets
- Total stockholders equity in Health Equity: $1.030 billion
- Stockholders equity per share: $14.53
- Health Equity is trading at 3.03 times its stockholders equity per share, which is within the expected range of between 2 and 4 times that most firms tend to trade at
- The price to book value of the S&P 500 is currently at 3.34 (Read more about the S&P 500 here)
Health Equity's management commentary on their 4th quarter 2019 earnings report
DRAPER, Utah, March 16, 2020 (GLOBE NEWSWIRE) -- HealthEquity, Inc. (NASDAQ: HQY) ("HealthEquity" or the "Company"), the nation's largest health savings account ("HSA") non-bank custodian, today announced financial results for its fourth quarter and fiscal year ended January 31, 2020.
“The HealthEquity team delivered a strong fourth quarter to cap another record-setting year of growth in fiscal 2020, while also accelerating the WageWorks integration. Revenue for the full year increased 85% to $532 million, while driving Adjusted EBITDA growth 66% to $196 million – both record highs,” said Jon Kessler, President and CEO of HealthEquity. “More importantly, we have entered fiscal year 2021 with momentum in HSA growth, taking a larger share of the market than ever before.”
“The HealthEquity team delivered a strong fourth quarter to cap another record-setting year of growth in fiscal 2020, while also accelerating the WageWorks integration. Revenue for the full year increased 85% to $532 million, while driving Adjusted EBITDA growth 66% to $196 million – both record highs,” said Jon Kessler, President and CEO of HealthEquity. “More importantly, we have entered fiscal year 2021 with momentum in HSA growth, taking a larger share of the market than ever before.”
New HSA openings and HSA asset growth
HealthEquity reported sales of 724,000 new HSAs in the year ended January 31, 2020, 7% more than in the previous fiscal year. HSA members grew their balances by approximately $1.7 billion during the year, a 35% increase year over year, reflecting both large net inflows and positive market results.
WageWorks closing and integration
HealthEquity completed its acquisition of WageWorks on August 30, 2019. We aim to achieve our previously stated goal of a run rate of $50 million of net synergies by the end of fiscal 2021. We have continued to make progress on commitments to WageWorks clients, and expect to complete the on-shoring of all telephone-based member services to the United States during the second quarter of fiscal 2021.
Business outlook
For the fiscal year ending January 31, 2021, we expect our revenue to be between $770 million and $790 million. Our outlook for net loss is a range of $14 million to $4 million, resulting in a net loss per diluted share range of $0.19 to $0.05. Our Adjusted EBITDA outlook is a range of $245 million to $255 million. We also expect our non-GAAP net income, calculated using the updated method described below, to be in a range between $124 million and $132 million. Our non-GAAP net income outlook, results in a non-GAAP net income per diluted share range between $1.70 and $1.81 (based on an estimated 73 million weighted-average shares outstanding).
See “Non-GAAP financial information” below for definitions of our Adjusted EBITDA and non-GAAP net income. A reconciliation of the non-GAAP financial measures used throughout this release to the most comparable GAAP financial measures is included with the financial tables at the end of this release.
HealthEquity reported sales of 724,000 new HSAs in the year ended January 31, 2020, 7% more than in the previous fiscal year. HSA members grew their balances by approximately $1.7 billion during the year, a 35% increase year over year, reflecting both large net inflows and positive market results.
WageWorks closing and integration
HealthEquity completed its acquisition of WageWorks on August 30, 2019. We aim to achieve our previously stated goal of a run rate of $50 million of net synergies by the end of fiscal 2021. We have continued to make progress on commitments to WageWorks clients, and expect to complete the on-shoring of all telephone-based member services to the United States during the second quarter of fiscal 2021.
Business outlook
For the fiscal year ending January 31, 2021, we expect our revenue to be between $770 million and $790 million. Our outlook for net loss is a range of $14 million to $4 million, resulting in a net loss per diluted share range of $0.19 to $0.05. Our Adjusted EBITDA outlook is a range of $245 million to $255 million. We also expect our non-GAAP net income, calculated using the updated method described below, to be in a range between $124 million and $132 million. Our non-GAAP net income outlook, results in a non-GAAP net income per diluted share range between $1.70 and $1.81 (based on an estimated 73 million weighted-average shares outstanding).
See “Non-GAAP financial information” below for definitions of our Adjusted EBITDA and non-GAAP net income. A reconciliation of the non-GAAP financial measures used throughout this release to the most comparable GAAP financial measures is included with the financial tables at the end of this release.
Health Equity (NASDAQ: HQY) stock price history
The image below, obtained from Google shows Health Equity's stock chart for the last 5 years. It's been a very good time for Health Equity stockholders over the last 5 years. 5 years ago the stock of Health Equity was trading at around $23 and its currently trading at $44.15 Thats an impressive 91.9% return provided to Health Equity stockholders over the last 5 years.
The stock of Health Equity is trading a lot closer to its 52 week low of $41.06 than it is to its 52 week high of $88.78, which to us is a clear indication that the short term sentiment and momentum of Health Equity stock is very negative at this point in time. The stock has suffered a significant decline in recent weeks, as has most in the global market sell off triggered by Coronavirus fears. Read more about the recent market sell off's here.
The stock of Health Equity is trading a lot closer to its 52 week low of $41.06 than it is to its 52 week high of $88.78, which to us is a clear indication that the short term sentiment and momentum of Health Equity stock is very negative at this point in time. The stock has suffered a significant decline in recent weeks, as has most in the global market sell off triggered by Coronavirus fears. Read more about the recent market sell off's here.
Recent coverage of Health Equity
The extract below discusses the latest regarding Health Equity as obtained from TheStreet.com
HealthEquity (NASDAQ:HQY) earnings for fiscal fourth quarter of 2020 have HQY stock down after markets closed Monday. This comes after the health savings company reported adjusted earnings per share (EPS) of 39 cents on revenue of $201.2 million. These are both better than Wall Street’s estimates of 35 cents per share and revenue of $199.26 million.
Read the full article here
HealthEquity (NASDAQ:HQY) earnings for fiscal fourth quarter of 2020 have HQY stock down after markets closed Monday. This comes after the health savings company reported adjusted earnings per share (EPS) of 39 cents on revenue of $201.2 million. These are both better than Wall Street’s estimates of 35 cents per share and revenue of $199.26 million.
Read the full article here
Health Equity (NASDAQ: HQY) latest stock valuation
So what do we value Health Equity stock at based on their 4th quarter 2019 earnings report and their fiscal guidance provided? Based on Health Equity's earnings report and the fiscal guidance provided our valuation model provides a target (full value) price for Health Equity stock at $27.70
We therefore believe the stock of Health Equity is overvalued at its current price.
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price which in this case is $27.70. A good entry point into Health Equity would therefore be at $24.90 or below. We expect the stock of Health Equity to continue its decline in coming weeks and months until it reaches levels closer to our target price (full value price).
We therefore believe the stock of Health Equity is overvalued at its current price.
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price which in this case is $27.70. A good entry point into Health Equity would therefore be at $24.90 or below. We expect the stock of Health Equity to continue its decline in coming weeks and months until it reaches levels closer to our target price (full value price).
Next earnings release of Health Equity
It is expected that Health Equity will release their 1st quarter 2020 earnings report in late June 2020