This week’s 16% return brings Inspired Entertainment (NASDAQ:INSE) three-year shareholder earnings to 33%

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Buying a low-cost index fund will get you the average return of the market. But if you invest in individual stocks, some are likely to underperform. Unfortunately for shareholders, while the Inspired Entertainment, Inc. (NASDAQ:INSE) The stock price has risen 33% over the past three years, which is below market performance. Zooming in, the stock is actually down 11% over the past year.

After a strong gain last week, it’s worth seeing if longer-term returns have been driven by improving fundamentals.

Inspired Entertainment is currently unprofitable, so most analysts would look to revenue growth to get a sense of how fast the underlying business is growing. Shareholders of unprofitable companies generally expect strong revenue growth. Indeed, rapid revenue growth can be easily extrapolated to predict profits, often of considerable size.

Over the past 3 years, Inspired Entertainment has seen revenue grow by 20% per year. That’s a lot better than most loss-making companies. The stock is up 10% over that time – a decent but not impressive return. Generally, we expect a higher share price given the impressive growth in earnings. The stock may have been overvalued before or its losses are worrying the market. But you might want to take a closer look at this one.

The graph below illustrates the evolution of income and revenue over time (reveal the exact values ​​by clicking on the image).

NasdaqCM: INSE Earnings and Revenue Growth as of July 31, 2022

It is good to see that there has been significant insider buying over the past three months. This is a positive point. That said, we believe earnings and revenue growth trends are even more important factors to consider. If you are considering buying or selling Inspired Entertainment stock, you should check out this free report showing analyst earnings forecasts.

A different perspective

The 11% total return received by Inspired Entertainment shareholders over the past year is not far off the market return of -11%. The silver lining is that longer-term investors would have made a total return of 0.5% per year over half a decade. If the stock price has been impacted by changing sentiment, rather than deteriorating trading conditions, this could be an opportunity. While it is worth considering the various impacts that market conditions can have on the stock price, there are other, even more important factors. Like risks, for example. Every business has them, and we’ve spotted 2 warning signs for Inspired Entertainment (of which 1 is significant!) that you should know.

Inspired Entertainment isn’t the only stock insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider buying, might be just the ticket.

Please note that the market returns quoted in this article reflect the average market-weighted returns of stocks currently trading on US exchanges.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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