Does Ark Royal's (WSE:ARK) Share Price Gain of 63% Match Its Business Performance?

Ark Royal SA (WSE:ARK) shareholders might understandably be very concerned that the share price has dropped 54% in the last quarter. On the bright side the returns have been quite good over the last half decade. Its return of 63% has certainly bested the market return!

Check out our latest analysis for Ark Royal

With just zł104,500 worth of revenue in twelve months, we don't think the market considers Ark Royal to have proven its business plan. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). Investors will be hoping that Ark Royal can make progress and gain better traction for the business, before it runs low on cash.

As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. You should be aware that there is always a chance that this sort of company will need to issue more shares to raise money to continue pursuing its business plan. While some such companies do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized). Some Ark Royal investors have already had a taste of the sweet taste stocks like this can leave in the mouth, as they gain popularity and attract speculative capital.

Ark Royal had liabilities exceeding cash by zł65k when it last reported in September 2019, according to our data. That puts it in the highest risk category, according to our analysis. So we're surprised to see the stock up 117% per year, over 5 years , but we're happy for holders. It's clear more than a few people believe in the potential. The image below shows how Ark Royal's balance sheet has changed over time; if you want to see the precise values, simply click on the image. You can see in the image below, how Ark Royal's cash levels have changed over time (click to see the values).

In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. However you can take a look at whether insiders have been buying up shares. If they are buying a significant amount of shares, that's certainly a good thing. Luckily we are in a position to provide you with this free chart of insider buying (and selling).

A Different Perspective

We're pleased to report that Ark Royal shareholders have received a total shareholder return of 43% over one year. That gain is better than the annual TSR over five years, which is 10%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Ark Royal better, we need to consider many other factors. Case in point: We've spotted 4 warning signs for Ark Royal you should be aware of, and 2 of them are potentially serious.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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