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Volatility 101: Should Arena Events Group (LON:ARE) Shares Have Dropped 30%?

Simply Wall St

It is a pleasure to report that the Arena Events Group plc (LON:ARE) is up 39% in the last quarter. But that doesn't change the fact that the returns over the last year have been less than pleasing. After all, the share price is down 30% in the last year, significantly under-performing the market.

Check out our latest analysis for Arena Events Group

Because Arena Events Group made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last year Arena Events Group saw its revenue grow by 21%. We think that is pretty nice growth. Meanwhile, the share price is down 30% over twelve months, which is disappointing given the progress made. This implies the market was expecting better growth. But if revenue keeps growing, then at a certain point the share price would likely follow.

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

AIM:ARE Income Statement, February 13th 2020

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

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Arena Events Group the TSR over the last year was -27%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While Arena Events Group shareholders are down 27% for the year (even including dividends) , the market itself is up 14%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. It's great to see a nice little 39% rebound in the last three months. This could just be a bounce because the selling was too aggressive, but fingers crossed it's the start of a new trend. It's always interesting to track share price performance over the longer term. But to understand Arena Events Group better, we need to consider many other factors. Be aware that Arena Events Group is showing 5 warning signs in our investment analysis , and 1 of those is a bit concerning...

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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

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.

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. Thank you for reading.