We believe investing is smart because history shows that stock markets go higher in the long term. But if when you choose to buy stocks, some of them will be below average performers. Unfortunately for shareholders, while the HealthStream, Inc. (NASDAQ:HSTM) share price is up 24% in the last year, that falls short of the market return. However, the stock hasn't done so well in the longer term, with the stock only up 16% in three years.

The past week has proven to be lucrative for HealthStream investors, so let's see if fundamentals drove the company's one-year performance.

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

HealthStream was able to grow EPS by 52% in the last twelve months. This EPS growth is significantly higher than the 24% increase in the share price. So it seems like the market has cooled on HealthStream, despite the growth. Interesting.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

HealthStream shareholders are up 25% for the year (even including dividends). But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 3% over half a decade It is possible that returns will improve along with the business fundamentals. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 1 warning sign for HealthStream that you should be aware of before investing here.

We will like HealthStream better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.