How Recent Price Movements Impact HealthEquity’s Long Term Investment Case in 2025

If you’ve ever stared at HealthEquity’s ticker and wondered if now is the right time to buy, hold, or sell, you’re not alone. There’s no shortage of opinions on the stock’s current run, especially with this year’s market fluctuations keeping all investors a bit on their toes. HealthEquity’s price has perked up over the last five years, delivering a sturdy 62.3% return and comfortably outpacing a lot of sector peers. However, the story gets more complicated in the short term: shares are down 1.9% over the past week and 5.5% year to date. These moves have caught the attention of investors looking for growth, value, or simply an edge in a market that’s quick to price in any sign of risk or opportunity.

A few recent market shifts, such as heightened attention on consumer-directed healthcare platforms and evolving views around healthcare spending, seem to be part of the equation, with investor sentiment fluctuating around HealthEquity’s prospects. If you’ve noticed the volatility and are curious whether the stock’s recent dip means opportunity or warning, you’re in good company.

The real question is whether HealthEquity is undervalued at current levels, and if so, by how much. To help answer that, analysts often assign companies a valuation score based on how many different checks they pass for being undervalued. HealthEquity scores a 3 out of 6 by this measure, not a screaming bargain, but not overpriced either. Before making your next move, let’s look at how those valuation methods stack up and why some investors think there’s an even better way to judge value when all is said and done.

HealthEquity delivered 4.2% returns over the last year. See how this stacks up to the rest of the Healthcare industry.

Approach 1: HealthEquity Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s value by projecting its future cash flows and discounting them back to today’s dollars. This method is well-regarded for valuing companies like HealthEquity, whose profits are expected to grow over time.

Currently, HealthEquity generates $135.6 million in free cash flow, with projections pointing toward steady growth in the coming decade. By 2028, analysts expect annual free cash flow to climb to $489 million, and extrapolated estimates suggest further increases out to 2035. These cash flow numbers remain under $1 billion, so they are best understood in millions of dollars. The calculations use the US dollar, as reported by the company.

Using a two-stage free cash flow to equity model, the DCF places HealthEquity’s intrinsic value at $168.06 per share. Compared to the recent share price, this implies the stock is trading at a 45.6% discount to its calculated fair value, which may indicate undervaluation at current levels.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests HealthEquity is undervalued by 45.6%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: HealthEquity Price vs Earnings (PE)

The price-to-earnings (PE) ratio is a widely accepted valuation metric for profitable companies like HealthEquity, since it shows how much investors are willing to pay today for a dollar of the company's earnings. This metric works especially well for firms with steady profits, providing a quick sense of market expectations and growth potential.

Interpreting the “right” PE ratio depends a lot on a company’s growth prospects and perceived risk. Fast-growing, stable businesses usually command higher PE ratios. In contrast, slower-growth or riskier companies tend to trade at lower multiples. For HealthEquity, the current PE ratio stands at 54.0x, which looks considerably higher than the healthcare industry average of 21.2x and the average peer group multiple of 17.5x. This raises questions about whether the market is too optimistic, or if there is something in HealthEquity’s earnings story that justifies such a premium.

This is where Simply Wall St’s proprietary “Fair Ratio” steps in. Unlike simple comparisons with peers or industry averages, the Fair Ratio adjusts for factors such as a company’s earnings growth outlook, profit margins, risk profile, industry characteristics, and size. For HealthEquity, the Fair Ratio is calculated at 32.7x. This suggests that, after accounting for all those unique company traits, a fair PE ratio should be around 32.7x, which is significantly lower than the company’s current PE. Because the actual multiple is well above the Fair Ratio, the evidence points to the stock being overvalued using this approach.

Result: OVERVALUED

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

Upgrade Your Decision Making: Choose your HealthEquity Narrative

Earlier we mentioned that there's an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is your story about a company, connecting your perspective and assumptions about HealthEquity’s future, such as growth rates or profit margins, directly to financial forecasts and fair value estimates. Instead of relying solely on broad metrics, Narratives let you shape your view by highlighting what you believe will drive HealthEquity’s long-term success or pose risks. This approach makes investment decisions more accessible, as you can easily build or explore Narratives on Simply Wall St’s Community page, used by millions of investors.

Narratives help clarify whether it’s time to buy or sell by comparing your calculated Fair Value, based on your assumptions, to the current share price. The best part is that Narratives update dynamically when new events, like earnings releases or breaking news, affect the company’s outlook, ensuring your valuations stay relevant. For example, some investors, focusing on rapid market expansion and tech innovation, see a Fair Value for HealthEquity as high as $134 per share, while others, concerned about competition and cost pressures, estimate as low as $108. Narratives empower you to make informed moves based on the story you believe in most.

Do you think there's more to the story for HealthEquity? Create your own Narrative to let the Community know!

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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