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Despite the downward trend in earnings at HealthEquity (NASDAQ:HQY) the stock lifts 6.0%, bringing five-year gains to 97%

·2-min read

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. But more than that, you probably want to see it rise more than the market average. Unfortunately for shareholders, while the HealthEquity, Inc. (NASDAQ:HQY) share price is up 97% in the last five years, that's less than the market return. On a brighter note, more newer shareholders are probably rather content with the 26% share price gain over twelve months.

Since the stock has added US$319m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View 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. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the last half decade, HealthEquity became profitable. That would generally be considered a positive, so we'd expect the share price to be up.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
earnings-per-share-growth

We know that HealthEquity has improved its bottom line lately, but is it going to grow revenue? Check if analysts think HealthEquity will grow revenue in the future.

A Different Perspective

HealthEquity shareholders gained a total return of 26% during the year. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 14% per year over five year. This suggests the company might be improving over 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 4 warning signs for HealthEquity (1 can't be ignored!) that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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. 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.

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