HealthStream falls 8.4% because of earnings results

What happened

HealthStream (HSTM) fell 8.4% on November 3, 2026, because of its third-quarter earnings results, which beat per-share expectations but showed weaker operating income. The stock closed at $31.67 after it opened 2.0% below the previous close and traded at 4.3 times its 20-day average. The drop came while the S&P 500 rose 0.4% and the Healthcare sector median rose 0.6%, leaving the stock 9.0 percentage points worse than the sector median.

How big was the move

The session was larger than normal for the stock, a move of 4.6 times a typical daily move for this stock, and trading volume was 4.3 times its 20-day average. Over the last five sessions the stock fell 7.3% while the S&P 500 over five sessions fell 2.0%. Market value stood at $1.03 billion at the close. With a beta of 0.60, the stock tends to move less than the market, making the down day notable for its size relative to typical trading.

The technical picture

Technically, the stock sat 5.8% below its 20-day moving average and 1.8% above its 50-day moving average, while it was 23.3% above its 200-day moving average. The 50-day average was above the 200-day average, a sign of an established uptrend, and the stock had spent 113 consecutive trading days above the 200-day average. The Relative Strength Index (14 days) was 43, inside a neutral range between 30 and 70, and the stock was 11.0% below its 52-week high. Over one month the stock rose 0.4%, over three months it rose 13.1% and over one year it rose 28.7%, leaving it 18.1 percentage points ahead of the S&P 500 over the past year.

Fundamentals and valuation

For the four quarters through September 30, 2026, revenue was $328.0 million, which grew 9.8% from a year earlier, and diluted earnings per share were $0.70, up 2.2% from the prior period. Gross margin narrowed slightly to 64.7% from 65.3% a year earlier, while operating margin edged to 7.6% from 7.5% a year earlier. The company reported net cash of $46.2 million and a free-cash-flow margin of 12.5%, with return on invested capital of 5.0%.

Valuation metrics showed the stock at 45.5 times trailing earnings and 43.0 times expected forward earnings, with a free-cash-flow yield of 4.0%. The price to trailing earnings was lower than 62% of its own readings over the past five years, where the five-year median was 51.2 times earnings. Share count over one year decreased by 0.5%. Those figures point to a richly valued but cash-generative business, with strong Stability and Quality scores in its sector.

Earnings and analyst expectations

HealthStream reported third-quarter 2026 results including revenues of $83.3 million, an increase of 8.9% from $76.5 million in Q3 2025, and operating income of $6.6 million, down 13.0% from $7.6 million a year earlier. Quarterly earnings per share were $0.18, above the last consensus, and management said on the earnings call that it raised its full-year outlook and highlighted spending to enhance its digital learning platform, integrated workforce products and career-network services.

The report marked the third consecutive quarter beating estimates, with the average surprise over the last four reports 8.4% above estimates. The typical two-day reaction after recent reports had been a stock rise of 1.4%. Investors will watch whether the raised outlook and continued investment translate into improved operating leverage in coming quarters; for now the operating income decline helped drive the negative session reaction despite the EPS beat. The next scheduled report date is February 22, 2027.

What to watch

• November 2, 2026: quarterly EPS of $0.18 against $0.16 expected, 13.7% above estimates
• Next report due February 22, 2027
• Consensus price target $27.00, 14.7% below the closing price
• Number of analysts with a rating: 16
• Share rating Buy or Strong Buy: 44%