Brokers Are Upgrading Their Views On Cara Therapeutics, Inc. (NASDAQ:CARA) With These New Forecasts

Cara Therapeutics, Inc. (NASDAQ:CARA) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects.

Following the upgrade, the latest consensus from Cara Therapeutics' eight analysts is for revenues of US$73m in 2022, which would reflect a substantial 181% improvement in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 28% to US$1.25. Yet before this consensus update, the analysts had been forecasting revenues of US$63m and losses of US$1.52 per share in 2022. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a sizeable increase to their revenue forecasts while also reducing the estimated loss as the business grows towards breakeven.

See our latest analysis for Cara Therapeutics

Despite these upgrades, the analysts have not made any major changes to their price target of US$24.25, implying that their latest estimates don't have a long term impact on what they think the stock is worth. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Cara Therapeutics analyst has a price target of US$30.00 per share, while the most pessimistic values it at US$13.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The analysts are definitely expecting Cara Therapeutics' growth to accelerate, with the forecast 297% annualised growth to the end of 2022 ranking favourably alongside historical growth of 57% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 2.9% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Cara Therapeutics to grow faster than the wider industry.

The Bottom Line

The most important thing here is that analysts reduced their loss per share estimates for this year, reflecting increased optimism around Cara Therapeutics' prospects. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. Some investors might be disappointed to see that the price target is unchanged, but we feel that improving fundamentals are usually a positive - assuming these forecasts are met! So Cara Therapeutics could be a good candidate for more research.

It's great to see the analysts upgrading their estimates, but the biggest highlight to us is that the business is expected to become profitable in the foreseeable future. For more information, you can click through to our free platform to learn more about these forecasts.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.