Does Cara Therapeutics' (NASDAQ:CARA) Share Price Gain of 40% Match Its Business Performance?

One simple way to benefit from the stock market is to buy an index fund. But if you choose individual stocks with prowess, you can make superior returns. For example, the Cara Therapeutics, Inc. (NASDAQ:CARA) share price is up 40% in the last three years, clearly besting the market return of around 29% (not including dividends).

See our latest analysis for Cara Therapeutics

Because Cara Therapeutics made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

Over the last three years Cara Therapeutics has grown its revenue at 91% annually. That's much better than most loss-making companies. While the compound gain of 12% per year over three years is pretty good, you might argue it doesn't fully reflect the strong revenue growth. If that's the case, now might be the time to take a close look at Cara Therapeutics. If the company is trending towards profitability then it could be very interesting.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

If you are thinking of buying or selling Cara Therapeutics stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Cara Therapeutics shareholders are down 20% for the year, but the market itself is up 9.7%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 5.1%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Cara Therapeutics is showing 4 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...

We will like Cara Therapeutics better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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