Assessing HealthEquity After New Digital Health Rollouts and a 9.2% Share Price Climb

• Wondering if HealthEquity is a hidden bargain or priced to perfection? You are not alone. Many investors are taking a closer look at its current value.
• The stock has moved 1.4% over the last week and climbed 9.2% during the past month. This suggests renewed interest and possible shifts in how the market perceives its prospects and risks.
• In recent weeks, HealthEquity made headlines with strategic partnerships and new digital health product rollouts that have captured investor attention. These developments are helping to shape momentum in the stock and provide essential context for understanding the recent upward moves.
• On our current valuation checks, HealthEquity scores a 2 out of 6. This means it appears undervalued on two key fronts. Next, we will break down how this score is calculated and cover a range of valuation approaches. Stick around to the end to discover a perspective beyond the numbers.

HealthEquity scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: HealthEquity Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is a valuation approach that projects a company's expected future cash flows and discounts them back to today using an appropriate rate. This helps estimate the present value of the business based on its expected ability to generate cash in years to come.

For HealthEquity, the current Free Cash Flow stands at approximately $135.6 million. Analyst projections suggest substantial growth over the coming years, with cash flows expected to rise to $490.2 million by 2028. Looking further, extrapolations estimate annual Free Cash Flow exceeding $742 million by 2035. These forecasts utilize a two-stage growth framework, taking into account both analyst outlooks and systematically modeled estimates for later years.

Based on these projections, the DCF model yields an intrinsic value of $168.36 per share. Relative to the current market price, this calculation suggests HealthEquity is trading at around a 37.6% discount and may be undervalued by the market.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests HealthEquity is undervalued by 37.6%. Track this in your watchlist or portfolio, or discover 926 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for HealthEquity.

Approach 2: HealthEquity Price vs Earnings (PE Ratio)

For profitable companies, the Price-to-Earnings (PE) ratio is one of the most widely used valuation tools. It measures how much investors are willing to pay today for a dollar of the company’s current earnings. A higher PE typically reflects higher growth expectations or lower perceived risk, while a lower PE may signal caution or undervaluation by the market.

HealthEquity’s current PE ratio stands at 62x. To put this in perspective, the broader Healthcare industry averages 22.8x, and similar peer companies trade at about 21.5x. Clearly, HealthEquity is valued at a significant premium compared to both its industry and peer group, likely reflecting strong growth expectations from investors.

However, Simply Wall St’s proprietary Fair Ratio for HealthEquity is 31.7x. The Fair Ratio is a more refined benchmark. It factors in specifics like HealthEquity’s expected earnings growth, its profit margins, its unique market position, the risk profile, and its market cap, alongside industry context. This approach is more reliable than peer or industry averages, since it adjusts for factors unique to HealthEquity that could justify a higher or lower multiple.

Comparing the Fair Ratio (31.7x) to the company’s current PE (62x) suggests the stock is trading well above where it should be based on these fundamentals, implying it is likely overvalued at current levels.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1433 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your HealthEquity Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is simply your investment story, the reasoning and assumptions behind your outlook for a company, including your fair value estimate and projections for growth in revenue, profits, and margins.

With Narratives, you connect what is unique about a company, such as HealthEquity’s regulatory tailwinds or digital transformation efforts, to a specific financial forecast and a resulting fair value, all in one clear, personalized view. Narratives are accessible to everyone through the Community page on Simply Wall St, a tool powered by millions of real investor insights.

Narratives empower you to decide whether to buy or sell by comparing your estimated fair value to the current share price, and they update dynamically when fresh news, earnings, or regulatory changes happen so your perspective can evolve with the market.

For example, some investors see HealthEquity’s major market expansion justifying price targets as high as $134.00, while others highlight risks and assign a lower fair value around $108.00. This serves as a reminder that your narrative reflects your unique beliefs, not just the numbers.

Do you think there's more to the story for HealthEquity? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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