Robinhood Markets (NASDAQ:HOOD) has surged over 25% in the past month, fueled by speculation of its inclusion in the S&P 500 index. Such an inclusion would have triggered significant inflows from index-tracking funds. However, Robinhood was not added in the S&P 500’s latest quarterly rebalance. This raises a critical question: is HOOD stock still a good investment at $72? We believe it is not.
While we see minimal fundamental concerns with Robinhood, its current valuation is simply too high. Our conclusion is based on a comprehensive analysis of HOOD’s current valuation compared to its recent operating performance and its present and historical financial health.
Our in-depth review of Robinhood Markets, focusing on Growth, Profitability, Financial Stability, and Downturn Resilience, reveals a company with a very strong operating performance and financial condition. However, even strong fundamentals can be overshadowed by an elevated valuation.. That said, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception. Separately, see – QBTS Stock: What’s Next For D-Wave After 1,350% Rally?
How Does Robinhood Markets’ Valuation Look vs. The S&P 500?
Going by what you pay per dollar of sales or profit, HOOD stock looks very expensive compared to the broader market.
- Robinhood Markets has a price-to-sales (P/S) ratio of 19.9 vs. a figure of 3.0 for the S&P 500
- Additionally, the company’s price-to-free cash flow (P/FCF) ratio is 58.6 compared to 20.5 for S&P 500
- And, it has a price-to-earnings (P/E) ratio of 40.9 vs. the benchmark’s 26.4
How Have Robinhood Markets’ Revenues Grown Over Recent Years?
Robinhood Markets’ Revenues have grown considerably over recent years.
- Robinhood Markets has seen its top line grow at an average rate of 30.0% over the last 3 years (vs. increase of 5.5% for S&P 500)
- Its revenues have grown 59.6% from $2.0 Bil to $3.3 Bil in the last 12 months (vs. growth of 5.5% for S&P 500)
- Also, its quarterly revenues grew 50.0% to $927 Mil in the most recent quarter from $618 Mil a year ago (vs. 4.8% improvement for S&P 500)
How Profitable Is Robinhood Markets?
Robinhood Markets’ profit margins are considerably higher than most companies in the Trefis coverage universe.
Does Robinhood Markets Look Financially Stable?
Robinhood Markets’ balance sheet looks very strong.
- Robinhood Markets’ Debt figure was $9.1 Bil at the end of the most recent quarter, while its market capitalization is $64 Bil (as of 6/10/2025). This implies a strong Debt-to-Equity Ratio of 14.0% (vs. 19.9% for S&P 500). [Note: A low Debt-to-Equity Ratio is desirable]
- Cash (including cash equivalents) makes up $11 Bil of the $28 Bil in Total Assets for Robinhood Markets. This yields a very strong Cash-to-Assets Ratio of 40.9% (vs. 13.8% for S&P 500)
How Resilient Is HOOD Stock During A Downturn?
HOOD stock has fared much worse than the benchmark S&P 500 index during some of the recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.
Inflation Shock (2022)
- HOOD stock fell 90.2% from a high of $70.39 on 4 August 2021 to $6.89 on 16 June 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
- The stock fully recovered to its pre-Crisis peak by 3 June 2025
- Since then, the stock has increased to a high of $74.88 on 8 June 2025 and currently trades at around $73
Covid Pandemic (2020)
- HOOD stock fell 75.7% from a high of $70.39 on 4 August 2021 to $17.11 on 29 December 2021, vs. a peak-to-trough decline of 33.9% for the S&P 500
- The stock fully recovered to its pre-Crisis peak by 3 June 2025
Putting All The Pieces Together: What It Means For HOOD Stock
In summary, Robinhood Markets’ performance across the parameters detailed above are as follows:
- Growth: Extremely Strong
- Profitability: Extremely Strong
- Financial Stability: Extremely Strong
- Downturn Resilience: Extremely Weak
- Overall: Very Strong
While Robinhood demonstrates very strong performance across key financial parameters, its current valuation is exceptionally high. HOOD stock is trading at 20 times its trailing revenues, significantly higher than the S&P 500’s average of 3.2 and even its own three-year average price-to-sales (P/S) ratio of 8 times. This elevated valuation raises significant concerns.
Given these stretched metrics, we believe investors would be wise to wait for a notable dip in HOOD’s stock price before considering buying. Surely, we could be wrong, and investors may continue to value HOOD stock at even higher levels, considering the company’s WonderFi acquisition and other international initiatives. But the risk seems elevated at these levels.
See, there always remains a meaningful risk when investing in a single, or just a handful of stocks. Consider Trefis High Quality (HQ) Portfolio which, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.