For many, the main point of investing in the stock market is to achieve spectacular returns. And highest quality companies can see their share prices grow by huge amounts. For example, the eHealth, Inc. (NASDAQ:EHTH) share price is up a whopping 782% in the last half decade, a handsome return for long term holders. This just goes to show the value creation that some businesses can achieve. On top of that, the share price is up 60% in about a quarter.
Anyone who held for that rewarding ride would probably be keen to talk about it.
We don’t think that eHealth’s modest trailing twelve month profit has the market’s full attention at the moment. We think revenue is probably a better guide. Generally speaking, we’d consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.
In the last 5 years eHealth saw its revenue grow at 9.4% per year. That’s a fairly respectable growth rate. Arguably it’s more than reflected in the very strong share price gain of 55% a year over a half a decade. We usually like strong growth stocks but it does seem the market already appreciates this one quite well!
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling eHealth stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
It’s nice to see that eHealth shareholders have received a total shareholder return of 109% over the last year. That gain is better than the annual TSR over five years, which is 55%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 3 warning signs we’ve spotted with eHealth .
There are plenty of other companies that have insiders buying up shares. You probably do 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.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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