$HQY Health Equity

I have mentioned this one before, it is a leader in the fast growth HSA account management industry and has recently acquired a company to let it expand into 401K management. There are a number of these out there, but its main competitor is Wageworks (WAGE). There is competition looming as Fidelity told me they are looking to get into this business, and why not Vanguard? My company used “HSA”, which was ok. It now lets me manage my money through TD Ameritrade instead of just its own mutual funds.

I tried this for 3 years with my company and contribed the max each time (they kicked in some to get us to choose that option, which is part of a High Deductibility Account (which can feel painful). I was lucky to be in a financial position to take the advice of experts and spend any medical money from my “checkbook” instead of my HSA account, thus leaving that to act as a like a 401k and grow tax free. (And to be used tax free for medical. I can also take it out like a 401k after the age of 65).

I like the idea of HSAs, as they let you save money before taxes and they theoretically encourage more incentive for consumers to make “better” medical choices (e.g. an MRI at the hospital costs $900 and at the shack down the street is it $500, so if you are paying from your own money you are going to pick a cheaper commodity. )

I was worried that new healthcare and tax bills could hurt this growth, but the article asuages my fears.

Here is the article link

It is from IBD’s “New America”, which is where I also found LGIH and some others I have presented to the board.


Today, HealthEquity owns about 13% of the market in health savings accounts, or HSAs, says Cornelio Ash, an analyst for William O’Neil & Co., a sister company to Investor’s Business Daily. The HSA market is poised to outgrow the 401(k) boom that the retirement market saw in the 1980s, he says.

Already the HSA market is outperforming historical growth of the 401(k) market. The HSA market grew at a 36% compound annual growth rate between 2006 and 2016, and is expected to be worth $44 billion by year’s end, he said. Ash expects political trends to drive HealthEquity and WageWorks.

Under bills in the House and Senate, HSA contribution limits could increase to $6,550 from $3,440 for individuals and to $13,100 from $6,750 for families, Ash says. Consumers are also embracing the concept, angling to have better control over their health care destinies, he said.

Even without Washington’s help, the HSA market is still poised for 18%-20% growth through 2018, though that could be as high as 25% if contribution limits are lifted, Ash said.

HealthEquity also partners with 20 of the top 50 largest health plans in the country and 500 employers across the nation, Neeleman said. In the recent fiscal quarter ended April 30, HealthEquity pulled in $55.4 million in sales, growing 28% vs. the prior quarter, and hitting 2.8 million HSA members.

But HealthEquity is facing a tough battle — with itself. Sales growth slowed for the fourth consecutive quarter, to 26% in the first fiscal quarter ended April 30.

HSA membership growth hit 2.8 million in that period, but decelerated for the fifth straight quarter, running to 27% growth.

Neeleman and Ash say HealthEquity is still outgrowing the broader HSA market, which includes rivals like WageWorks, Webster Financial (WBS) and OptumHealth, a subsidiary under UnitedHealth Group (UNH). The market grew about 20% in the first quarter of the calendar year, Neeleman says.

“It’s getting harder (for HealthEquity) to beat,” O’Neil’s Ash said. “But we’re so, so in the early days of this. To take the baseball example, we’re not even in the first or second inning. It (the HSA market) is still so small.”

Future competition: Fidelity and other bigs.
Possible buy out: Maybe Schwab wants to acquire these accounts to get in the business the easy way.

Growth Ratings:
Composite Rating 95 Pass
EPS Rating …87 Pass (but lowish
RS Rating …91 Pass
Group RS Rating …B Pass
SMR Rating …A Pass
Acc/Dis Rating …B+ Pass

Some fundy checkpoints:

EPS % Chg (Last Qtr) 27%
Last 3 Qtrs Avg EPS Growth 17%

Qtrs of EPS Acceleration 1

EPS Est % Chg (Current Qtr) -12%
Estimate Revisions (down)
Last Quarter % Earnings Surprise 18.8%

Annual Earnings
3 Yr EPS Growth Rate 122%
Consecutive Yrs of Annual EPS Growth 3
EPS Est % Chg for Current Year 18%

Sales, Margin, ROE
SMR Rating A
Sales % Chg (Last Qtr) 26%
3 Yr Sales Growth Rate 43%
Annual Pre-Tax Margin 24.9%
Annual ROE 12.5% (lower than desired for a great growth stock)
Debt/Equity Ratio 0%

% Change In Funds Owning Stock -1%
Qtrs Of Increasing Fund Ownership 0

Worth checking to see if you want it to be a started position.