Inspired Entertainment (NASDAQ:INSE) delivers shareholders respectable 6.9% CAGR over 5 years, surging 12% in the last week alone

If you buy and hold a stock for many years, you’d hope to be making a profit. Furthermore, you’d generally like to see the share price rise faster than the market. But Inspired Entertainment, Inc. (NASDAQ:INSE) has fallen short of that second goal, with a share price rise of 40% over five years, which is below the market return. Zooming in, the stock is actually down 11% in the last year.

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

See our latest analysis for Inspired Entertainment

Given that Inspired Entertainment didn’t make a profit in the last twelve months, we’ll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

For the last half decade, Inspired Entertainment can boast revenue growth at a rate of 18% per year. That’s well above most pre-profit companies. It’s nice to see shareholders have made a profit, but the gain of 7% over the period isn’t that impressive compared to the overall market. You could argue the market is still pretty skeptical, given the growing revenues. Arguably this falls in a potential sweet spot – modest share price gains but good top line growth over the long term justifies investigation, in our book.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Take a more thorough look at Inspired Entertainment’s financial health with this free report on its balance sheet.

A Different Perspective

While the broader market gained around 33% in the last year, Inspired Entertainment shareholders lost 11%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 7% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. For example, we’ve discovered 1 warning sign for Inspired Entertainment that you should be aware of before investing here.

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Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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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.