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When you buy shares in a company, there is always a risk that the price drops to zero. But if you pick the right business to buy shares in, you can make more than you can lose. Take, for example Inspired Entertainment, Inc. (NASDAQ:INSE). Its share price is already up an impressive 284% in the last twelve months. Then again, the 9.3% share price decline hasn't been so fun for shareholders. This could be related to the soft market, with stocks down around 0.8% in the last month. Having said that, the longer term returns aren't so impressive, with stock gaining just 25% in three years.
Inspired Entertainment wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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 Inspired Entertainment saw its revenue grow by 30%. That's a fairly respectable growth rate. The revenue growth is decent but the share price had an even better year, gaining 284%. If the profitability is on the horizon then now could be a very exciting time to be a shareholder. Of course, we are always cautious about succumbing to 'fear of missing out' when a stock has shot up strongly.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
If you are thinking of buying or selling Inspired Entertainment stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
We're pleased to report that Inspired Entertainment rewarded shareholders with a total shareholder return of 284% over the last year. So this year's TSR was actually better than the three-year TSR (annualized) of 8%. These improved returns may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Inspired Entertainment (of which 1 can't be ignored!) you should know about.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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. 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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