Investors bid CareDx (NASDAQ:CDNA) up US$98m despite increasing losses YoY, taking one-year return to 333%

While stock picking isn't easy, for those willing to persist and learn, it is possible to buy shares in great companies, and generate wonderful returns. When you buy and hold the right company, the returns can make a huge difference to both you and your family. For example, the CareDx, Inc (NASDAQ:CDNA) share price rocketed moonwards 333% in just one year. On top of that, the share price is up 99% in about a quarter. Zooming out, the stock is actually down 53% in the last three years.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

View our latest analysis for CareDx

Given that CareDx didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

CareDx actually shrunk its revenue over the last year, with a reduction of 4.0%. So it's very confusing to see that the share price gained a whopping 333%. It's pretty clear the market isn't basing its valuation on fundamental metrics like revenue. Typically, when we see this in a biotech stock, it's because investors are getting excited about an impending drug development milestone, such as clinical trial results. To us, a gain like this looks like speculation, but there might be historical trends to back it up.

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 CareDx's financial health with this free report on its balance sheet.

A Different Perspective

It's good to see that CareDx has rewarded shareholders with a total shareholder return of 333% in the last twelve months. That's better than the annualised return of 3% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand CareDx better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for CareDx you should know about.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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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.