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HealthEquity, Inc. (HQY) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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HealthEquity, Inc. (HQY)

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Intrinsic Value (DCF)

Current$86.94
→
Intrinsic$102.17
+18%
$66.71$102.17$169.50
Market implies 16% growth for 5 years
HQY shows 18% potential upside using 20% growth — reasonable if fundamentals hold.
At $87, the market prices in continued high-teens cash flow growth (16%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $67 → Bull $170. Current price implies expectations below the base case, but well above the bear case.
Discount ↓Growth →16%18%20%22%
8%$127$138$150$163
10%$86$94$102$111
12%$64$70$76$82
14%$50$54$59$64

Bull Case

  • Bull case ($170) offers 95% upside at 24% growth, 9% discount
  • 15% margin of safety vs. base case estimate
  • Market-implied growth (16%) ≤ historical CAGR (20%)

Bear Case

  • Bear case ($67) implies 23% downside at 16% growth, 12% discount
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5-Year Free Cash Flow Projection

Year 1$405.33M
Year 2$486.39M
Year 3$583.67M
Year 4$700.40M
Year 5$840.48M
Terminal$12.37B

📐 Model Inputs

Growth Rate20.0%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$337.77MTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is HQY stock undervalued or overvalued?
🟡 FAIRLY VALUED

HQY trades at $86.94, within 10% of our $102.17 intrinsic value estimate. At 10.0% WACC and 20.0% FCF growth, the market is pricing in assumptions roughly aligned with the 5-year historical CAGR. The valuation range spans $63.87 (bear) to $158.58 (bull).

What is HQY's intrinsic value?

Using a 5-year DCF model: Base FCF of $338M, projected at 20.0% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $813M net debt and dividing by 0.09B shares: Bear $63.87 | Base $102.17 | Bull $158.58. Current price $86.94 implies +7% to base case.

How is HQY's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 20.0% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($9.89B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 29.3x.