Will HealthEquity (NASDAQ:HQY) current volatility spike continue?

HealthEquity is generating 0.3502% of daily returns assuming volatility of 4.1871% on return distribution over 60 days investment horizon. Although many risk-takers are getting more into healthcare space, some of us are not very happy with HealthEquity's current volatility. We will evaluate if the latest HealthEquity price volatility suggests a bounce in January. The current above-average HealthEquity's volatility may impact the value of the stock as we project HealthEquity as currently overvalued. The real value, according to our calculations, is approaching 65.65 per share.
Published over a year ago
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Reviewed by Michael Smolkin

HealthEquity has roughly 268.91 M in cash with 116.84 M of positive cash flow from operations. This results in cash-per-share (CPS) ratio of 3.5.
Volatility is a rate at which the price of HealthEquity or any other equity instrument increases or decreases for a given set of returns. It is measured by calculating the standard deviation of the annualized returns over a given period of time and shows the range to which the price of HealthEquity may increase or decrease. In other words, similar to HealthEquity's beta indicator, it measures the risk of HealthEquity and helps estimate the fluctuations that may happen in a short period of time. So if prices of HealthEquity fluctuate rapidly in a short time span, it is termed to have high volatility, and if it swings slowly in a more extended period, it is understood to have low volatility. Please read more on our technical analysis page.

How important is HealthEquity's Liquidity

HealthEquity financial leverage refers to using borrowed capital as a funding source to finance HealthEquity ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. HealthEquity financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to HealthEquity's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of HealthEquity's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between HealthEquity's total debt and its cash.

HealthEquity Volatility Drivers

HealthEquity unsystematic risk is unique to HealthEquity and usually not directly affected by the market or economic environment. An example of unsystematic risk is the possibility of poor earnings or a layoff due to coronavirus. One may mitigate nonsystematic risk by buying different securities in the same industry or by buying in different sectors. For example, if you have a position in HealthEquity you can also buy Edwards Lifesciences Corp. You can also mitigate this risk by investing in the health care sector as well as in companies having nothing to do with it. This type of risk is also called diversifiable risk and can be understood from analyzing HealthEquity important indicators over time. Here we run a correlation analysis between relevant fundamental ratios over at least ten year period to find a relationship in the way they react to changes in HealthEquity income statement and balance sheet. Here are more details about HealthEquity volatility.
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0.970.630.950.960.70.920.90.90.91-0.08-0.32-0.620.46-0.47-0.44-0.47-0.74
0.610.630.530.740.570.710.450.50.55-0.45-0.89-0.80.45-0.16-0.29-0.35-0.48
0.990.950.530.890.710.830.970.970.97-0.07-0.24-0.650.45-0.45-0.38-0.41-0.86
0.910.960.740.890.710.970.830.820.84-0.19-0.46-0.660.46-0.47-0.48-0.52-0.74
0.760.70.570.710.710.560.710.780.80.11-0.31-0.460.920.160.190.19-0.67
0.840.920.710.830.970.560.750.720.74-0.33-0.46-0.670.31-0.63-0.62-0.64-0.64
0.960.90.450.970.830.710.750.970.96-0.05-0.18-0.610.42-0.42-0.35-0.38-0.93
0.980.90.50.970.820.780.720.971.00.05-0.2-0.590.55-0.28-0.22-0.25-0.88
0.980.910.550.970.840.80.740.961.00.05-0.24-0.610.57-0.26-0.22-0.25-0.86
-0.07-0.08-0.45-0.07-0.190.11-0.33-0.050.050.050.680.690.20.520.510.490.24
-0.31-0.32-0.89-0.24-0.46-0.31-0.46-0.18-0.2-0.240.680.81-0.250.130.260.310.33
-0.67-0.62-0.8-0.65-0.66-0.46-0.67-0.61-0.59-0.610.690.81-0.270.410.430.460.72
0.520.460.450.450.460.920.310.420.550.570.2-0.25-0.270.430.50.5-0.36
-0.39-0.47-0.16-0.45-0.470.16-0.63-0.42-0.28-0.260.520.130.410.430.920.890.36
-0.34-0.44-0.29-0.38-0.480.19-0.62-0.35-0.22-0.220.510.260.430.50.920.980.33
-0.37-0.47-0.35-0.41-0.520.19-0.64-0.38-0.25-0.250.490.310.460.50.890.980.36
-0.85-0.74-0.48-0.86-0.74-0.67-0.64-0.93-0.88-0.860.240.330.72-0.360.360.330.36
Click cells to compare fundamentals

A Deeper Analysis

The company reported the last year's revenue of 724.37 M. Reported Net Loss for the year was (19.85 M) with profit before taxes, overhead, and interest of 325.91 M.
 2017 2018 2019 2020 (projected)
Consolidated Income47.36 M73.9 M39.66 M37.27 M
Direct Expenses94.61 M106.05 M206.08 M222.35 M

HealthEquity has 91 percent likelihood to slide below $69 in January

The semi deviation is down to 3.38 as of today. HealthEquity shows above-average downside volatility for the selected time horizon. We advise investors to inspect HealthEquity further and ensure that all market timing and asset allocation strategies are consistent with the estimation of HealthEquity future alpha.

The Current Takeaway on HealthEquity Investment

While other entities under the health information services industry are still a bit expensive, HealthEquity may offer a potential longer-term growth to investors. While some investors may not share our view we believe that the current risk-reward utility is not appealing enough to do any trading. Please use our equity advice module to run different scenarios to ensure your current risk level and investment horizon are fully reflective of your current investing preferences in regards to HealthEquity.

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Editorial Staff

This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Ellen Johnson do not own shares of HealthEquity. Please refer to our Terms of Use for any information regarding our disclosure principles.

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