Cara Therapeutics, Inc. (NASDAQ:CARA) Analysts Just Slashed Next Year's Estimates

The analysts covering Cara Therapeutics, Inc. (NASDAQ:CARA) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for next year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.

Following the downgrade, the latest consensus from Cara Therapeutics' eight analysts is for revenues of US$114m in 2023, which would reflect a substantial 188% improvement in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 52% to US$0.80. However, before this estimates update, the consensus had been expecting revenues of US$130m and US$0.47 per share in losses. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.

View our latest analysis for Cara Therapeutics

There was no major change to the consensus price target of US$23.13, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Cara Therapeutics at US$29.00 per share, while the most bearish prices 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.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's clear from the latest estimates that Cara Therapeutics' rate of growth is expected to accelerate meaningfully, with the forecast 133% annualised revenue growth to the end of 2023 noticeably faster than its historical growth of 43% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 4.6% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Cara Therapeutics is expected to grow much faster than its industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses next year, suggesting all may not be well at Cara Therapeutics. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Cara Therapeutics after the downgrade.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Cara Therapeutics analysts - going out to 2025, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies 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.