Cara Therapeutics, Inc. (NASDAQ:CARA) just released its quarterly report and things are looking bullish. Sales crushed expectations at US$9.3m, beating expectations by 94%. Cara Therapeutics reported a statutory loss of US$0.35 per share, which - although not amazing - was much smaller than the analysts predicted. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
After the latest results, the eight analysts covering Cara Therapeutics are now predicting revenues of US$28.8m in 2021. If met, this would reflect a satisfactory 4.7% improvement in sales compared to the last 12 months. The loss per share is expected to ameliorate slightly, reducing to US$1.94. Before this earnings announcement, the analysts had been modelling revenues of US$27.6m and losses of US$2.01 per share in 2021. It looks like there's been a modest increase in sentiment in the recent updates, with the analysts becoming a bit more optimistic in their predictions for both revenues and losses per share.
There was no major change to the consensus price target of US$32.63, perhaps suggesting that the analysts remain concerned about ongoing losses despite the improved earnings and revenue outlook. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Cara Therapeutics analyst has a price target of US$40.00 per share, while the most pessimistic values it at US$18.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Cara Therapeutics' past performance and to peers in the same industry. We would highlight that Cara Therapeutics' revenue growth is expected to slow, with forecast 4.7% increase next year well below the historical 58%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 6.7% next year. Factoring in the forecast slowdown in growth, it seems obvious that Cara Therapeutics is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Fortunately, they also upgraded their revenue estimates, although our data indicates sales are expected to perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Cara Therapeutics going out to 2024, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 2 warning signs for Cara Therapeutics you should know about.
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