Baird upgrades HealthEquity on ‘multi-decade compounder’ potential

Baird upgraded HealthEquity to Outperform from Neutral with a price target of $87, up from $79. The analyst cites several recent positive developments and updates for the upgrade, including recent earnings, meetings with management, acquisition announcements, the recent Federal Reserve commentary and the stock’s “historically attractive valuation.” While a higher effective yield on cash is a material positive for the next few years, Baird is even more attracted by the “strong potential” for HealthEquity to be a “multi-decade compounder” as it builds on its leadership position in the growing health savings account market, the analyst tells investors in a research note. The firm says the company’s earnings and free cash flow have the potential for multi-year teens growth as margins expand with improved mix and scale.