Intrinsic value of HealthEquity, Inc. - HQY

Previous Close

$64.69

  Intrinsic Value

$25.42

stock screener

  Rating & Target

str. sell

-61%

Previous close

$64.69

 
Intrinsic value

$25.42

 
Up/down potential

-61%

 
Rating

str. sell

We calculate the intrinsic value of HQY stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 4.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  24.10
  22.19
  20.47
  18.92
  17.53
  16.28
  15.15
  14.14
  13.22
  12.40
  11.66
  10.99
  10.39
  9.85
  9.37
  8.93
  8.54
  8.19
  7.87
  7.58
  7.32
  7.09
  6.88
  6.69
  6.52
  6.37
  6.23
  6.11
  6.00
  5.90
Revenue, $m
  285
  349
  420
  500
  587
  683
  786
  897
  1,016
  1,142
  1,275
  1,416
  1,563
  1,717
  1,878
  2,045
  2,220
  2,402
  2,590
  2,787
  2,991
  3,203
  3,423
  3,652
  3,891
  4,139
  4,397
  4,665
  4,945
  5,237
Variable operating expenses, $m
  210
  256
  308
  366
  430
  500
  576
  657
  744
  836
  933
  1,035
  1,143
  1,256
  1,373
  1,496
  1,624
  1,757
  1,895
  2,039
  2,188
  2,343
  2,504
  2,672
  2,846
  3,027
  3,216
  3,413
  3,618
  3,831
Fixed operating expenses, $m
  6
  6
  6
  7
  7
  7
  7
  7
  7
  7
  8
  8
  8
  8
  8
  8
  9
  9
  9
  9
  9
  10
  10
  10
  10
  11
  11
  11
  11
  12
Total operating expenses, $m
  216
  262
  314
  373
  437
  507
  583
  664
  751
  843
  941
  1,043
  1,151
  1,264
  1,381
  1,504
  1,633
  1,766
  1,904
  2,048
  2,197
  2,353
  2,514
  2,682
  2,856
  3,038
  3,227
  3,424
  3,629
  3,843
Operating income, $m
  70
  87
  106
  127
  150
  176
  203
  233
  265
  298
  335
  372
  412
  453
  496
  541
  587
  636
  686
  739
  794
  850
  909
  970
  1,034
  1,101
  1,170
  1,241
  1,316
  1,394
EBITDA, $m
  81
  100
  122
  146
  173
  202
  233
  267
  303
  341
  382
  425
  469
  516
  565
  616
  670
  725
  782
  842
  904
  969
  1,036
  1,106
  1,178
  1,254
  1,332
  1,414
  1,500
  1,588
Interest expense (income), $m
  0
  0
  0
  1
  1
  1
  2
  2
  3
  4
  4
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  24
  25
Earnings before tax, $m
  70
  86
  105
  126
  149
  174
  201
  230
  261
  294
  330
  367
  405
  446
  488
  532
  578
  625
  675
  726
  780
  835
  893
  953
  1,016
  1,081
  1,149
  1,219
  1,293
  1,369
Tax expense, $m
  19
  23
  28
  34
  40
  47
  54
  62
  71
  79
  89
  99
  109
  120
  132
  144
  156
  169
  182
  196
  211
  226
  241
  257
  274
  292
  310
  329
  349
  370
Net income, $m
  51
  63
  77
  92
  109
  127
  147
  168
  191
  215
  241
  268
  296
  325
  356
  388
  422
  456
  493
  530
  569
  610
  652
  696
  742
  789
  839
  890
  944
  1,000

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  185
  226
  273
  324
  381
  443
  511
  583
  660
  742
  828
  919
  1,015
  1,115
  1,219
  1,328
  1,441
  1,559
  1,682
  1,810
  1,942
  2,080
  2,223
  2,372
  2,526
  2,687
  2,855
  3,029
  3,211
  3,401
Adjusted assets (=assets-cash), $m
  185
  226
  273
  324
  381
  443
  511
  583
  660
  742
  828
  919
  1,015
  1,115
  1,219
  1,328
  1,441
  1,559
  1,682
  1,810
  1,942
  2,080
  2,223
  2,372
  2,526
  2,687
  2,855
  3,029
  3,211
  3,401
Revenue / Adjusted assets
  1.541
  1.544
  1.538
  1.543
  1.541
  1.542
  1.538
  1.539
  1.539
  1.539
  1.540
  1.541
  1.540
  1.540
  1.541
  1.540
  1.541
  1.541
  1.540
  1.540
  1.540
  1.540
  1.540
  1.540
  1.540
  1.540
  1.540
  1.540
  1.540
  1.540
Average production assets, $m
  57
  70
  84
  100
  117
  137
  157
  179
  203
  228
  255
  283
  313
  343
  376
  409
  444
  480
  518
  557
  598
  641
  685
  730
  778
  828
  879
  933
  989
  1,047
Working capital, $m
  6
  7
  8
  10
  12
  14
  16
  18
  20
  23
  26
  28
  31
  34
  38
  41
  44
  48
  52
  56
  60
  64
  68
  73
  78
  83
  88
  93
  99
  105
Total debt, $m
  5
  12
  19
  27
  35
  45
  55
  66
  78
  91
  104
  118
  132
  148
  164
  180
  198
  216
  234
  254
  274
  295
  317
  340
  364
  388
  414
  441
  468
  497
Total liabilities, $m
  28
  35
  42
  50
  58
  68
  78
  89
  101
  113
  127
  141
  155
  171
  187
  203
  221
  239
  257
  277
  297
  318
  340
  363
  387
  411
  437
  463
  491
  520
Total equity, $m
  157
  192
  231
  275
  323
  376
  432
  494
  559
  628
  701
  779
  859
  944
  1,033
  1,125
  1,221
  1,321
  1,425
  1,533
  1,645
  1,762
  1,883
  2,009
  2,140
  2,276
  2,418
  2,566
  2,720
  2,880
Total liabilities and equity, $m
  185
  227
  273
  325
  381
  444
  510
  583
  660
  741
  828
  920
  1,014
  1,115
  1,220
  1,328
  1,442
  1,560
  1,682
  1,810
  1,942
  2,080
  2,223
  2,372
  2,527
  2,687
  2,855
  3,029
  3,211
  3,400
Debt-to-equity ratio
  0.030
  0.060
  0.080
  0.100
  0.110
  0.120
  0.130
  0.130
  0.140
  0.140
  0.150
  0.150
  0.150
  0.160
  0.160
  0.160
  0.160
  0.160
  0.160
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
Adjusted equity ratio
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  51
  63
  77
  92
  109
  127
  147
  168
  191
  215
  241
  268
  296
  325
  356
  388
  422
  456
  493
  530
  569
  610
  652
  696
  742
  789
  839
  890
  944
  1,000
Depreciation, amort., depletion, $m
  11
  14
  16
  19
  23
  26
  30
  34
  38
  43
  47
  52
  58
  64
  70
  76
  82
  89
  96
  103
  111
  119
  127
  135
  144
  153
  163
  173
  183
  194
Funds from operations, $m
  62
  77
  93
  111
  131
  153
  177
  202
  229
  258
  288
  320
  354
  389
  426
  464
  504
  545
  589
  633
  680
  728
  779
  831
  886
  942
  1,001
  1,063
  1,127
  1,193
Change in working capital, $m
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
Cash from operations, $m
  61
  75
  92
  110
  129
  151
  175
  200
  227
  255
  285
  317
  351
  386
  422
  461
  500
  542
  585
  629
  676
  724
  774
  827
  881
  937
  996
  1,057
  1,121
  1,188
Maintenance CAPEX, $m
  -9
  -11
  -13
  -16
  -19
  -22
  -25
  -29
  -33
  -38
  -42
  -47
  -52
  -58
  -64
  -70
  -76
  -82
  -89
  -96
  -103
  -111
  -119
  -127
  -135
  -144
  -153
  -163
  -173
  -183
New CAPEX, $m
  -11
  -13
  -14
  -16
  -18
  -19
  -21
  -22
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
Cash from investing activities, $m
  -20
  -24
  -27
  -32
  -37
  -41
  -46
  -51
  -57
  -63
  -69
  -75
  -81
  -89
  -96
  -104
  -111
  -118
  -127
  -135
  -144
  -153
  -163
  -173
  -183
  -194
  -205
  -217
  -229
  -241
Free cash flow, $m
  42
  52
  64
  78
  93
  110
  129
  148
  170
  192
  216
  242
  269
  297
  327
  357
  390
  423
  458
  494
  532
  571
  612
  654
  698
  744
  791
  841
  892
  946
Issuance/(repayment) of debt, $m
  5
  6
  7
  8
  9
  9
  10
  11
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  5
  6
  7
  8
  9
  9
  10
  11
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
Total cash flow (excl. dividends), $m
  47
  58
  71
  86
  102
  120
  139
  159
  182
  205
  230
  256
  284
  312
  343
  374
  407
  441
  477
  514
  552
  592
  634
  677
  722
  768
  817
  868
  920
  975
Retained Cash Flow (-), $m
  -30
  -35
  -39
  -44
  -48
  -53
  -57
  -61
  -65
  -69
  -73
  -77
  -81
  -85
  -88
  -92
  -96
  -100
  -104
  -108
  -112
  -117
  -121
  -126
  -131
  -136
  -142
  -148
  -154
  -160
Prev. year cash balance distribution, $m
  220
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  236
  24
  32
  42
  54
  67
  82
  98
  116
  136
  156
  179
  203
  228
  254
  282
  311
  341
  373
  406
  440
  476
  512
  551
  591
  632
  675
  720
  766
  815
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  227
  22
  28
  35
  42
  49
  55
  61
  67
  71
  74
  76
  77
  76
  75
  72
  68
  63
  57
  52
  46
  39
  34
  28
  23
  18
  14
  11
  8
  6
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
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HealthEquity, Inc. provides a range of solutions for managing healthcare accounts (Health Savings Accounts (HSAs), Health Reimbursement Arrangements (HRAs) and Flexible Spending Accounts (FSAs)) for health plans, insurance companies and third-party administrators. The Company is engaged in technology-enabled services platforms that allow consumers to make healthcare saving and spending decisions. Its platform provides an ecosystem where consumers can access their tax-advantaged healthcare savings, compare treatment options and pricing, evaluate and pay healthcare bills, receive personalized benefit and clinical information, earn wellness incentives and make educated investment choices to help in their tax-advantaged healthcare savings. Its products and services include healthcare saving and spending platform, health savings accounts, investment advisory services, reimbursement arrangements and healthcare incentives. Its ecosystem primarily consists of HSA.

FINANCIAL RATIOS  of  HealthEquity, Inc. (HQY)

Valuation Ratios
P/E Ratio 148.1
Price to Sales 21.6
Price to Book 14.7
Price to Tangible Book
Price to Cash Flow 83.7
Price to Free Cash Flow 116.7
Growth Rates
Sales Growth Rate 40.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -74%
Cap. Spend. - 3 Yr. Gr. Rate 21.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 10.4%
Ret/ On Assets - 3 Yr. Avg. 9.6%
Return On Total Capital 11.2%
Ret/ On T. Cap. - 3 Yr. Avg. 10.7%
Return On Equity 11.2%
Return On Equity - 3 Yr. Avg. 10.7%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 59.6%
Gross Margin - 3 Yr. Avg. 57.2%
EBITDA Margin 29.8%
EBITDA Margin - 3 Yr. Avg. 27.4%
Operating Margin 23%
Oper. Margin - 3 Yr. Avg. 20.9%
Pre-Tax Margin 22.5%
Pre-Tax Margin - 3 Yr. Avg. 20.4%
Net Profit Margin 14.6%
Net Profit Margin - 3 Yr. Avg. 13.1%
Effective Tax Rate 35%
Eff/ Tax Rate - 3 Yr. Avg. 35.7%
Payout Ratio 0%

HQY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HQY stock intrinsic value calculation we used $230 million for the last fiscal year's total revenue generated by HealthEquity, Inc.. The default revenue input number comes from 0001 income statement of HealthEquity, Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our HQY stock valuation model: a) initial revenue growth rate of 24.1% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for HQY is calculated based on our internal credit rating of HealthEquity, Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of HealthEquity, Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of HQY stock the variable cost ratio is equal to 73.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $6 million in the base year in the intrinsic value calculation for HQY stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for HealthEquity, Inc..

Corporate tax rate of 27% is the nominal tax rate for HealthEquity, Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the HQY stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for HQY are equal to 20%.

Life of production assets of 5.4 years is the average useful life of capital assets used in HealthEquity, Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for HQY is equal to 2%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $346.274 million for HealthEquity, Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 62.439 million for HealthEquity, Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of HealthEquity, Inc. at the current share price and the inputted number of shares is $4.0 billion.

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