Funds received (UPST 1.45%) Shareholders have been waiting for good news for a while, and it has finally arrived. The company saw solid progress in the third quarter, and Upstart stock soared 53% after the report was released.

You can already see where this is going. A 53% increase is incredible for shareholders, but is it too good to be true? This kind of breathtaking leap has an undercurrent of caution. And if you’ve been following Upstart stock, you know this isn’t an anomaly. Let’s take a look at why the market is excited and how investors should act on Upstart stock.

More than low interest rates

Third quarter results were generally better than expected. Revenue rose 20% year over year, a much-needed boost to sales that have been declining for several years already. Revenue of $162 million was well above forecasts of $150 million.

The adjusted loss per share was $0.06, well ahead of Wall Street’s expectations for $0.15, and a net loss of $6.8 million was significantly improved from $40.3 million last year. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) turned positive during the quarter, and management expects it to remain positive and continue to grow.

Management repeatedly said during the conference call that the success was due to internal system improvements and not the recently low interest rates, which only began to take effect at the very end of the quarter. CEO Dave Girouard explained that Upstart has rigorously upgraded its machine learning systems, leading to efficiency improvements, cost savings and a better, higher-converting platform. The impact of low interest rates is expected to be another positive factor for the company, but management was eager to attribute its performance to the changes taking place in the business.

As the platform improves and the climate becomes more welcoming to Upstart’s product, the future looks bright. Upstart has already added 24 new lending partners this year and has continued to grow its network throughout a challenging operating environment. The country is seeing an uptick in auto loans, which rose 46% year-over-year in the third quarter, and signed a new deal to fund $2 billion in loans over the next 18 months.

Its new home equity loan (HELOC) product is working extremely well. It has issued 600 HELOCs since its inception without any defects, and its HELOC coverage extends to 55% of the population.

Should you ride the roller coaster?

Historically, Upstart’s performance has been closely linked to the economic environment. Its history doesn’t go back very far since Upstart’s time as a public company hasn’t yet reached four years. It went public in a low-rate environment and demonstrated the kind of growth investors dream of, with triple-digit growth, soaring profits and disruptive activity that could change the way creditors approve loans. The stock entered the picture at the height of a robust bull market and Upstart stock has reached astronomical valuations. Then he collapsed as soon as the good times ended.

Since then, Upstart stock has experienced unusual volatility, rising and falling with good and bad news. Hence a gain of 53% on a good report. However, it is still at 80% of its peaks.

Investors are excited about the possibility that interest rates will now become a positive factor rather than a negative factor. The job market is strong, inflation is slowing, and the economy appears to be doing well. Lower interest rates combined with a booming economy could create the ideal conditions in which Upstart has thrived.

What should new investors do? Currently, Upstart shares are reserved for investors who have a high appetite for risk. Even if this is the case for you, you probably shouldn’t make it a large position in your portfolio. At the current price, Upstart stock is trading at a price/sales ratio of 12, which is very high compared to companies that are growing much faster. The price is pricing in strong growth, meaning that at any sign of pressure, the stock could fall again. About a third of Wall Street analysts believe Upstart stock is sold at this price.

Even risk-tolerant investors should only buy if they are confident in Upstart’s long-term prospects. Its journey could be very bumpy, and investors should be prepared to withstand volatility.