Profits or Revenue؛ More Related to Stock Returns?

This study aims to investigate the effect of revenue on the valuation of companies listed in Tehran stock exchange. According to the high earnings volatility and its management, this item cannot solely meet the user's needs and it is necessary to find the appropriate complementary information for it. It is argued that revenue is more persistent than earning as it is less affected by the surprising factors. Revenue management is more difficult than earnings management. There is no revenue ceiling and it is difficult to reduce the price without the devastating impact on the critical business activities.
Using the data of financial statements and the stock prices of 104 companies, listed on Tehran Stock Exchange during the years 2001 to 2010, and utilizing the multivariate sequential regression analysis, the results of the study indicate that there is generally a direct correlation between the firm valuation and its revenue level. There is no incremental information content of revenue compared to the earnings, while there is a significant relationship between the earnings per share and the firm valuation. Furthermore, a non-linear relationship has been confirmed between the firm revenue, earnings, and returns.