The Consensus EPS Estimates For Cara Therapeutics, Inc. (NASDAQ:CARA) Just Fell Dramatically

Today is shaping up negative for Cara Therapeutics, Inc. (NASDAQ:CARA) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. Shares are up 8.4% to US$13.85 in the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.

Following the downgrade, the consensus from eight analysts covering Cara Therapeutics is for revenues of US$21m in 2021, implying a painful 83% decline in sales compared to the last 12 months. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analysts forecasting losses of US$2.03 per share in 2021. Yet before this consensus update, the analysts had been forecasting revenues of US$26m and losses of US$1.83 per share in 2021. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

View our latest analysis for Cara Therapeutics

The consensus price target fell 5.5% to US$26.11, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Cara Therapeutics at US$33.00 per share, while the most bearish prices it at US$16.00. 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.

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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 97% by the end of 2021. This indicates a significant reduction from annual growth of 78% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 3.4% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Cara Therapeutics is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Cara Therapeutics' revenues are expected to grow slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Cara Therapeutics.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Cara Therapeutics analysts - going out to 2023, 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.
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