HealthEquity's (NASDAQ:HQY) investors will be pleased with their decent 48% return over the last year
Passive investing in index funds can generate returns that roughly match the overall market. But if you pick the right individual stocks, you could make more than that. To wit, the HealthEquity, Inc. (NASDAQ:HQY) share price is 48% higher than it was a year ago, much better than the market return of around 31% (not including dividends) in the same period. So that should have shareholders smiling. Having said that, the longer term returns aren't so impressive, with stock gaining just 13% in three years.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Check out our latest analysis for HealthEquity
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
HealthEquity went from making a loss to reporting a profit, in the last year.
The company was close to break-even last year, so earnings per share of US$0.34 isn't particularly stand out. But judging by the share price, the market is happy with the maiden profit. Inflection points like this can be a great time to take a closer look at a company.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It is of course excellent to see how HealthEquity has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
It's good to see that HealthEquity has rewarded shareholders with a total shareholder return of 48% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 0.8% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand HealthEquity better, we need to consider many other factors. For example, we've discovered 1 warning sign for HealthEquity that you should be aware of before investing here.
Of course HealthEquity may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
