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Did The Underlying Business Drive CareDx's (NASDAQ:CDNA) Lovely 417% Share Price Gain?

Simply Wall St

CareDx, Inc (NASDAQ:CDNA) shareholders might be concerned after seeing the share price drop 27% in the last month. But over three years the performance has been really wonderful. Indeed, the share price is up a whopping 417% in that time. So you might argue that the recent reduction in the share price is unremarkable in light of the longer term performance. The only way to form a view of whether the current price is justified is to consider the merits of the business itself.

View our latest analysis for CareDx

Because CareDx is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last 3 years CareDx saw its revenue grow at 38% per year. That's well above most pre-profit companies. In light of this attractive revenue growth, it seems somewhat appropriate that the share price has been rocketing, boasting a gain of 73% per year, over the same period. Despite the strong run, top performers like CareDx have been known to go on winning for decades. So we'd recommend you take a closer look at this one, or even put it on your watchlist.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

NasdaqGM:CDNA Income Statement, November 11th 2019

If you are thinking of buying or selling CareDx stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While the broader market gained around 13% in the last year, CareDx shareholders lost 25%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 23%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Before spending more time on CareDx it might be wise to click here to see if insiders have been buying or selling shares.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.