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Understanding HealthEquity’s Risk Factors

HealthEquity, Inc. (HQY) provides healthcare savings accounts. Recently, HealthEquity delivered better-than-expected Q2 fiscal 2022 performance on both revenue and earnings fronts.

Let’s take a look at the company’s latest financials, along with what has changed in its key risk factors that investors should be aware of.

On the back of growth across all of its verticals, HealthEquity’s Q2 revenue increased 7.4% year-over-year to $189.1 million, outperforming consensus estimates by $4.15 million. The total HSA assets of the company reached $15.5 billion, and total accounts increased by 5% to 13.1 million.

Adjusted EBITDA increased 9% over the previous year to $65.5 million. Earnings per share at $0.40 beat analysts’ estimates by $0.04. In comparison, the company had generated net earnings per share of $0.42 in the year-ago period. (See HealthEquity stock charts on TipRanks)

Looking ahead, for full Fiscal Year 2022, HealthEquity expects revenue to be in the range of $755 million to $765 million. It estimates non-GAAP net income per share to be between $1.45 and $1.50.

On September 9, Barrington analyst Alexander Paris reiterated a Buy rating on the stock, with a price target of $90. Paris commented, “We expect operating and financial performance to continue to improve as the economy gradually reopens and current headwinds abate, given HQY’s leading market position, the recurring nature, and visibility of its revenue, the leverage inherent in its model, and its high free cash flow conversion.”

Based on five Buys and two Holds, consensus on the Street is a Moderate Buy for HealthEquity. The average HQY price target of $87.17 implies 35.7% potential upside for the stock. Shares are up 25.9% over the past year.

Risk Factors

According to the new TipRanks Risk Factors tool, HealthEquity’s main risk category is Finance & Corporate, accounting for 38% of the total 50 risks identified. Since July, the company has added one key risk factor related to its acquisition of Further, under the Finance & Corporate risk category.

HealthEquity acknowledged that the acquisition of Further may not be completed, and the integration of Further’s business may not be successful. Many of the closing conditions of this acquisition are not under HealthEquity’s control.

If HealthEquity is not able to successfully integrate Further’s operations then it may incur unforeseen liabilities, and fail to achieve the revenue growth, synergies, and other benefits expected from this acquisition.

The sector average Finance & Corporate risk factor is 58%.

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