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Some Inspired Entertainment (NASDAQ:INSE) Shareholders Have Taken A Painful 80% Share Price Drop

Simply Wall St
·3 mins read

As an investor, mistakes are inevitable. But really bad investments should be rare. So consider, for a moment, the misfortune of Inspired Entertainment, Inc. (NASDAQ:INSE) investors who have held the stock for three years as it declined a whopping 80%. That'd be enough to cause even the strongest minds some disquiet. And over the last year the share price fell 72%, so we doubt many shareholders are delighted. Furthermore, it's down 70% in about a quarter. That's not much fun for holders. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

Check out our latest analysis for Inspired Entertainment

Inspired Entertainment isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over three years, Inspired Entertainment grew revenue at 2.6% per year. That's not a very high growth rate considering it doesn't make profits. But the share price crash at 41% per year does seem a bit harsh! While we're definitely wary of the stock, after that kind of performance, it could be an over-reaction. Before considering a purchase, take a look at the losses the company is racking up.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

NasdaqCM:INSE Income Statement April 17th 2020
NasdaqCM:INSE Income Statement April 17th 2020

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

A Different Perspective

Inspired Entertainment shareholders are down 72% for the year, falling short of the market return. Meanwhile, the broader market slid about 3.3%, likely weighing on the stock. Shareholders have lost 41% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. 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 for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Inspired Entertainment , and understanding them should be part of your investment process.

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.

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.