Please ensure Javascript is enabled for purposes of website accessibility

Why HealthStream Shares Plunged

By Sean Williams - Oct 23, 2012 at 3:03PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Is this meaningful or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Internet-based health-care learning solutions company HealthStream (HSTM 1.48%) shed as much as 10% in intraday trading after the company reported its third-quarter earnings results.

So what: For the quarter, HealthStream reported a profit of $0.07 on a 28% rise in revenue to $26.4 million. While sales surpassed Wall Street's expectations, profit fell shy of expectations by $0.01. Its HealthStream Learning segment provided the biggest sales boost, rising 35%, with management forecast operating income growth of 18% to 22% over the prior-year period. The drop in EPS compared to last year can be blamed on higher operating expenses.

Now what: Today's drop is a combination of HealthStream missing by $0.01 and the fact that it's valued at a pricey 66 times forward earnings. Look for HealthStream's learning segment to continue to be the primary growth driver for the company over the near term, but temper your expectations given that the valuation here is already frothy.

Craving more input? Start by adding HealthStream to your free and personalized watchlist so you can keep up on the latest news with the company.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

HealthStream, Inc. Stock Quote
HealthStream, Inc.
HSTM
$21.22 (1.48%) $0.31

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.