HealthEquity Inc (NASDAQ:HQY) Shows Strong Growth and Technical Momentum for Potential Upside

Combining basic strength with technical momentum is a strategy often used by investors looking for growth stocks with potential for upward movement. The method focuses on finding companies with solid earnings growth, stable financials, and rising profitability, qualities that point to long-term gains, while also spotting chart patterns that suggest short-term price increases. HealthEquity Inc (NASDAQ:HQY) appears to meet these conditions, showing strong growth fundamentals alongside a technical setup that may indicate a coming rise.

Fundamental Strength: Growth and Profitability

HealthEquity, a company offering technology-driven healthcare spending and savings solutions, performs well on key growth metrics, as seen in its fundamental analysis report. The company’s fundamentals are assessed across five main areas, with growth and profitability being notable:

• Revenue & Earnings Growth: HQY has seen a 19.21% year-over-year revenue increase, with EPS growing at an even higher 28.91% over the same period. The company’s three-year average revenue growth of 17.66% further highlights its upward trend.
• Profitability Margins: With a gross margin of 65.52% (better than 86% of industry peers) and an operating margin of 19.59% (above 96% of competitors), HQY shows efficient operations.
• Valuation Considerations: While the stock trades at a higher valuation (P/E of 29.10), this is supported by its above-average earnings growth expectations (17.85% forward EPS growth).

These metrics match the growth investing approach detailed in our introductory article, where steady revenue and earnings growth are key for spotting companies likely to outperform the market.

Technical Setup: Consolidation Before Breakout?

The technical analysis report shows a mixed but potentially promising setup:

• Recent Price Action: HQY has been trading between $93.65 and $106.60 over the past month, currently near the lower end of this range. A bounce from support at $94.38,$94.52 could signal a turnaround.
• Resistance Levels: A move above the $97.08,$99.17 resistance zone (marked by moving averages and trendlines) may confirm upward movement.
• Relative Strength: Despite recent weakness, HQY has outperformed 83% of its healthcare peers over the past year, indicating underlying strength.

The stock’s setup rating of 7/10 suggests that while broader technicals are neutral, the consolidation near support could offer a potential entry point if buying interest returns.

Why This Combination Matters

Growth stocks with favorable technical patterns often draw institutional attention, as improving fundamentals align with price momentum. HQY’s strong profitability and growing market in healthcare savings accounts (HSAs) provide a fundamental advantage, while the technical setup hints the stock may be ready for its next upward phase.

For investors searching for similar opportunities, our Strong Growth Stocks with Good Technical Setup Ratings screen lists other candidates that fit these criteria.

Disclaimer: This analysis is not investment advice. Always conduct your own research or consult a financial advisor before making investment decisions.