Carna Biosciences (TSE:4572) adds JP¥1.3b to market cap in the past 7 days, though investors from five years ago are still down 63%

Over the last month the Carna Biosciences, Inc. (TSE:4572) has been much stronger than before, rebounding by 110%. But that doesn't change the fact that the returns over the last half decade have been disappointing. Indeed, the share price is down 63% in the period. Some might say the recent bounce is to be expected after such a bad drop. Of course, this could be the start of a turnaround.

While the last five years has been tough for Carna Biosciences shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

Carna Biosciences isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over half a decade Carna Biosciences reduced its trailing twelve month revenue by 10% for each year. That's definitely a weaker result than most pre-profit companies report. Arguably, the market has responded appropriately to this business performance by sending the share price down 10% (annualized) in the same time period. We don't generally like to own companies that lose money and don't grow revenues. You might be better off spending your money on a leisure activity. You'd want to research this company pretty thoroughly before buying, it looks a bit too risky for us.

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 Carna Biosciences' financial health with this free report on its balance sheet.

A Different Perspective

It's nice to see that Carna Biosciences shareholders have received a total shareholder return of 57% over the last year. There's no doubt those recent returns are much better than the TSR loss of 10% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Carna Biosciences (of which 2 are concerning!) you should know about.

We will like Carna Biosciences better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.