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Here's Why HealthEquity Is Up 12% Today

By Matthew Frankel, CFP® – Mar 20, 2018 at 9:43AM

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Strong earnings and a strong outlook are boosting the HSA custodian's stock.

What happened

HealthEquity (HQY -0.67%), a custodian of health savings accounts (HSAs) and other healthcare savings products, reported better-than-expected quarterly earnings that sent shares up sharply. As of 3 p.m. EDT on Tuesday, the stock was up by about 12% as a result.

HealthEquity reported earnings that met analyst expectations, along with revenue that handily beat estimates.

Doctor consulting with patient

Image source: Getty Images.

So what

The 2018 fiscal year (which just ended) was a strong one for HealthEquity: Revenue increased by 29% year over year and earnings per share jumped by 75%. In addition, the company opened 669,000 new HSAs, a record high for HealthEquity.

In addition, the company gained market share and saw strong growth all around. "We continued to outpace the market and gain market share with 35% growth in custodial assets, including 96% custodial investment growth, and 24% growth of HSA members," said HealthEquity president and CEO Jon Kessler.

Now what

Perhaps the most significant item in HealthEquity's earnings report is its guidance for fiscal year 2019 (which started on Feb. 1). The company expects revenue of $276 million to $282 million (which at its midpoint would represent 22% annual growth), as well as earnings of $0.98 to $1.04 per share (31% growth). Both of these figures are significantly higher than analyst expectations, and would be extremely strong growth.

It's also worth mentioning that the benefits of contributing to health savings accounts are still not well-known to much of the American population. As more people become aware of HSAs and the unique advantages they offer, HealthEquity's impressive growth could continue for years to come.

Matthew Frankel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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