Shares of Robinhood Markets (NASDAQ: HOOD) experienced a significant surge this week, with a 20% increase, according to data from S&P Global Market Intelligence. The popular retail brokerage, known for pioneering free stock trading, received an analyst upgrade and benefited from the resurgence of retail day traders. Currently, the fintech disruptor has seen a remarkable 62% year-to-date (YTD) rise in its stock value.

Bank of America played a crucial role in the latest boost for Robinhood. The financial institution recently upgraded its price target on the company's stock from $14 to $24 per share, offering a significant vote of confidence in the fast-growing company. With the release of Robinhood's first-quarter earnings report, Bank of America believes the company is gaining momentum in revenue growth, primarily driven by a potential return of retail trading activity. Additionally, higher margins have driven a positive profit inflection, and the company has capitalized on the popularity of cryptocurrency trading.

During the first quarter, Robinhood observed a 40% year-over-year growth in revenue, while also reporting positive earnings per share (EPS) of $0.18. This is a positive sign for a company that had previously struggled with profitability. Despite these gains, Robinhood's shares remain 70% below their all-time highs. However, the company has found success with its premium Robinhood Gold membership, garnering 1.7 million subscribers.

The recent uptick in Robinhood's stock can also be attributed to the resurgence of meme stock traders. Although the duration of this phenomenon may be short-lived, if meme stocks maintain their upward momentum, Robinhood is likely to benefit financially.

Considering the current circumstances, with Robinhood's market capitalization reaching $18 billion, some experts question the worthiness of investing at these elevated prices. While revenue growth has been robust, the online brokerage's financials do not necessarily justify the high valuation, as it generated just $2 billion in revenue over the previous 12 months and remains barely profitable. Furthermore, Robinhood's stock has a PE ratio above 100.

Despite the stock's popularity among day traders and the current narratives supporting its rise, prudent investors emphasize the importance of a company's long-term financial health and the price paid for a stock. Robinhood's current valuation appears exorbitant compared to its underlying financials, suggesting caution in investing in this stock at present.

In a recent analysis, The Motley Fool Stock Advisor termed Robinhood Markets as not being among the 10 best stocks for investors to consider at the moment. Instead, the analyst team recommended 10 other stocks that they believe have the potential to generate significant returns in the coming years.

Ultimately, the financial well-being of a company and the price paid for its stock drive long-term investment returns. Based on the current valuation, it would be wise for investors to approach Robinhood Markets with caution and explore alternative investment opportunities.

Brett Schafer, the author of the provided information, does not hold any positions regarding the mentioned stocks. The Motley Fool, the source of the information, also does not have any positions in the stocks mentioned and adheres to a disclosure policy.