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Is HealthEquity's (NASDAQ:HQY) Share Price Gain Of 238% Well Earned?

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Simply Wall St
·3 min read
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The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on a lighter note, a good company can see its share price rise well over 100%. One great example is HealthEquity, Inc. (NASDAQ:HQY) which saw its share price drive 238% higher over five years. On top of that, the share price is up 41% in about a quarter.

View our latest analysis for HealthEquity

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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's earnings per share are down 30% per year, despite strong share price performance over five years.

Essentially, it doesn't seem likely that investors are focused on EPS. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.

In contrast revenue growth of 36% per year is probably viewed as evidence that HealthEquity is growing, a real positive. In that case, the company may be sacrificing current earnings per share to drive growth.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growth
earnings-and-revenue-growth

HealthEquity is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling HealthEquity stock, you should check out this free report showing analyst consensus estimates for future profits.

A Different Perspective

HealthEquity shareholders are up 4.9% for the year. But that return falls short of the market. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 28% over five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. 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. To that end, you should learn about the 6 warning signs we've spotted with HealthEquity (including 1 which is a bit unpleasant) .

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.