Reasons to Hold HealthEquity Stock in Your Portfolio for Now

HealthEquity, Inc. HQY has been gaining from its business model and strategy. The optimism, led by a solid fourth-quarter fiscal 2026 performance and strength in Health Savings Accounts (HSAs), is expected to contribute further. However, data security threats are major concerns.

In the past six months, the Zacks Rank #3 (Hold) company’s shares have lost 9% compared with 10.6% decline of the industry. The S&P 500 has lost 4.9% during the said time frame.

The renowned provider of technology-enabled services platforms for healthcare savings and spending decisions has a market capitalization of $7.06 billion. The company projects 21% growth over the next five years and expects to witness continued improvements in its business. HealthEquity’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 14.03%.

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Reasons Favoring HQY’s Growth

AI & Digital Innovation Drive Scalable Efficiency: In fourth-quarter fiscal 2026, HealthEquity further advanced its AI and digital innovation strategy, with management now framing AI as an active driver of operating leverage rather than a forward-looking initiative. The company highlighted that AI-enabled tools, including expedited claims processing, intelligent self-service solutions and evolving agentic support capabilities, are already reducing reliance on phone-based interactions, lowering service costs and improving resolution speed. These efficiencies contributed to a $17 million year-over-year decline in service costs and supported more than 700 basis points of gross margin expansion, demonstrating that automation and digital workflows are translating into tangible financial benefits.

Expansion of Health Savings Accounts: HealthEquity has experienced significant growth in its HSA offerings. As of Jan. 31, 2026, the total number of Health Savings Accounts (HSAs) for which HealthEquity served as a non-bank custodian was 10.6 million, up 7% year over year.

HealthEquity reported 832,000 HSAs with investments as of Jan. 31, 2026, up 10% year over year. Total accounts, as of Jan. 31, 2026, were 17.8 million. This uptick included total HSAs and 7.2 million Consumer Direct Benefits (CDBs).

Total HSA assets were $36.5 billion at the end of Jan. 31, 2026, up 14% year over year. This included $18 billion of HSA cash and $18.5 billion of HSA investments.

Client-held funds, which are deposits held on behalf of HealthEquity’s clients to facilitate the administration of its CDBs and from which the company generates custodial revenues, were $1.1 billion as of Jan. 31, 2026.

Strong Q4 Results: HealthEquity exited fourth-quarter fiscal 2026 with better-than-expected results. The company witnessed solid top-line and bottom-line performances in the reported quarter. Solid growth in HSAs also drove the top line. The solid uptick in total HSA assets in the reported quarter is promising. Significant improvements in operating and gross margins also bode well.

HealthEquity reported strong account growth momentum exiting fiscal 2026, adding a record 550,000 HSAs in the fiscal fourth quarter and more than 1 million new HSAs for the full year, bringing total accounts to 17.8 million. Management emphasized that this growth reflects robust execution across new sales, high retention levels (above 98%) and continued adoption of HSA-qualified plans.

A Factor That May Offset HQY’s Gains

Data Security Threats: HealthEquity manages highly sensitive personal data and more than $34 billion of client HSA assets, making platform security a persistent operational risk. While fraud reimbursements declined to approximately $0.3 million in the fiscal third quarter of 2026, management continues to invest heavily in fraud prevention and security controls, underscoring that the threat remains structural rather than eliminated. Any material security breach could result in the loss of funds or sensitive data, litigation, regulatory scrutiny and reputational damage, potentially disrupting operations, pressuring margins and eroding client and member confidence.

Estimate Trend

HealthEquity has been witnessing a positive estimate revision trend for fiscal 2027. Over the past 30 days, the Zacks Consensus Estimate for earnings per share (EPS) has moved upward by 2 cents to $4.60.

The Zacks Consensus Estimate for first-quarter fiscal 2027 revenues is pegged at $354.4 million, implying a 7.1% rise from the year-ago reported number. The consensus mark for fiscal first-quarter EPS is pinned at $1.11, implying a 14.4% improvement year over year.

Key Picks

Some better-ranked stocks in the broader medical space are Envista NVST, Globus Medical GMED and BrightSpring Health Services BTSG. Each stock presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Estimates for Envista’s 2026 EPS have increased 11.9% in the past 60 days. Shares of the company have surged 44.9% in the past year against the industry’s 23.4% decline. NVST’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 16.4%. In the last reported quarter, it delivered an earnings surprise of 18.8%.

Globus Medical shares have risen 14% in the past year. Estimates for the company’s 2026 EPS have increased 11.2% to $4.46 in the past 30 days. GMED’s earnings beat estimates in three of the trailing four quarters and missed on one occasion, delivering an average surprise of 18.8%. In the last reported quarter, it posted an earnings surprise of 20.8%.

BrightSpring Health Services shares have soared 134.5% in the past year. Estimates for the company’s 2026 EPS have jumped 20.1% to $1.61 in the past 30 days. BTSG’s earnings topped estimates in three of the trailing four quarters and missed on one occasion, delivering an average surprise of 40.4%. It has an estimated long-term earnings growth rate of 47.2% compared with the industry’s 14.5% growth.

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Globus Medical, Inc. (GMED): Free Stock Analysis Report

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This article originally published on Zacks Investment Research (zacks.com).

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