Earnings Beat: HealthEquity, Inc. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

By
Simply Wall St
Published
March 17, 2021
NasdaqGS:HQY

The full-year results for HealthEquity, Inc. (NASDAQ:HQY) were released last week, making it a good time to revisit its performance. It looks like a credible result overall - although revenues of US$734m were what the analysts expected, HealthEquity surprised by delivering a (statutory) profit of US$0.12 per share, an impressive 97% above what was forecast. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

See our latest analysis for HealthEquity

earnings-and-revenue-growth
NasdaqGS:HQY Earnings and Revenue Growth March 17th 2021

Following the latest results, HealthEquity's nine analysts are now forecasting revenues of US$750.7m in 2022. This would be a credible 2.3% improvement in sales compared to the last 12 months. Per-share earnings are expected to soar 142% to US$0.29. Before this earnings report, the analysts had been forecasting revenues of US$750.2m and earnings per share (EPS) of US$0.33 in 2022. So there's definitely been a decline in sentiment after the latest results, noting the real cut to new EPS forecasts.

It might be a surprise to learn that the consensus price target was broadly unchanged at US$85.80, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values HealthEquity at US$100.00 per share, while the most bearish prices it at US$59.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that HealthEquity's revenue growth is expected to slow, with the forecast 2.3% annualised growth rate until the end of 2022 being well below the historical 36% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 7.2% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than HealthEquity.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for HealthEquity going out to 2026, and you can see them free on our platform here..

You still need to take note of risks, for example - HealthEquity has 5 warning signs (and 1 which is potentially serious) we think you should know about.

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This article by Simply Wall St is general in nature. 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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