Cara Therapeutics, Inc. (NASDAQ:CARA) shareholders will doubtless be very grateful to see the share price up 39% in the last month. But that doesn't change the fact that the returns over the last three years have been less than pleasing. Truth be told the share price declined 24% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.
While the stock has risen 14% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.
Our analysis indicates that CARA is potentially undervalued!
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. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over three years, Cara Therapeutics grew revenue at 17% per year. That's a fairly respectable growth rate. Shareholders have seen the share price fall at 7% per year, for three years. So the market has definitely lost some love for the stock. However, that's in the past now, and it's the future is more important - and the future looks brighter (based on revenue, anyway).
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Take a more thorough look at Cara Therapeutics' financial health with this free report on its balance sheet.
A Different Perspective
It's good to see that Cara Therapeutics has rewarded shareholders with a total shareholder return of 3.7% in the last twelve months. Notably the five-year annualised TSR loss of 1.1% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 1 warning sign for Cara Therapeutics that you should be aware of.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
What are the risks and opportunities for Cara Therapeutics?
Trading at 85.3% below our estimate of its fair value
Earnings are forecast to grow 57.97% per year
No risks detected for CARA from our risks checks.
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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.
Cara Therapeutics, Inc., an early commercial-stage biopharmaceutical company, focuses on developing and commercializing chemical entities with a primary focus on pruritus and pain by selectively targeting kappa opioid receptors in the United States.
Exceptional growth potential with excellent balance sheet.