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Shareholders in Madison Square Garden Entertainment (NYSE:MSGE) have lost 31%, as stock drops 17% this past week

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It's easy to match the overall market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Investors in Madison Square Garden Entertainment Corp. (NYSE:MSGE) have tasted that bitter downside in the last year, as the share price dropped 31%. That's disappointing when you consider the market declined 9.4%. Madison Square Garden Entertainment may have better days ahead, of course; we've only looked at a one year period. More recently, the share price has dropped a further 25% in a month. But this could be related to poor market conditions -- stocks are down 13% in the same time.

Since Madison Square Garden Entertainment has shed US$427m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Madison Square Garden Entertainment

Because Madison Square Garden Entertainment 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. Shareholders of unprofitable companies usually expect strong 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 twelve months, Madison Square Garden Entertainment increased its revenue by 60%. That's a strong result which is better than most other loss making companies. The share price drop of 31% over twelve months would be considered disappointing by many, so you might argue the company is getting little credit for its impressive revenue growth. Prima facie, revenue growth like that should be a good thing, so it's worth checking whether losses have stabilized. Our monkey brains haven't evolved to think exponentially, so humans do tend to underestimate companies that have exponential growth.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growth
earnings-and-revenue-growth

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

We doubt Madison Square Garden Entertainment shareholders are happy with the loss of 31% over twelve months. That falls short of the market, which lost 9.4%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. The share price decline has continued throughout the most recent three months, down 22%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Madison Square Garden Entertainment you should know about.

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 US 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.

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