Simple Concepts Research Group

Why Are Investors Bullish On Inspired Entertainment (NASDAQ: INSE)?

by | Dec 29, 2021 | Stock Picks

Inspired Entertainment (INSE) Company Overview & Stock Price Forecast

This article provides a brief analysis and stock rating for Inspired Entertainment (INSE) including an updated stock price target. Additional data on the company’s earnings yield, price/earnings ratio, return on invested capital and YTD performance are discussed as well.

Inspired Entertainment Fundamentals

INSE Stock Rating

Stock Price Target: $18.46

In the section below, we discuss the earnings yield, P/E, return on invested capital and YTD performance for Inspired Entertainment in comparison to the Hotel/Gaming industry and the S&P 500.

Inspired Entertainment is a Small Cap company with a Market Cap of $276.6M.

How are investors using Inspired Entertainment earnings yield to assess the company?

Inspired Entertainment (INSE)_ Earnings Yield in Comparison to the Hotel_Gaming Industry, S&P 500 and 10 Year Treasury Rate

The earnings yield is used to show the percentage of a company’s earnings per share. Investors typically use earnings yield to determine which assets are underpriced or overpriced relative to other variables, like sector, industry or bond yields. Simply put, the earnings yield of a company can be used to assess how expensive a company is in relation to the earnings that are generated. When valuing companies, the SIS Research Group does not utilize the inverse P/E ratio to calculate the earnings yield. Instead, we use an adjusted earning yield calculation to capture variation amongst companies (i.e. debt and tax rates).

The current earnings yield for Inspired Entertainment is 17.39%, in comparison to 3.36% for the S&P 500 and 1.50% for the 10-year treasury bond. The median earnings yield for the Hotel/Gaming industry is 5.76%.

What does Inspired Entertainment Price-to-Earnings Ratio (P/E) tell investors about the company?

Inspired Entertainment (INSE)_ Price-to-Earnings, Price-to-Sales and Price-to-Book Value in Comparison to the Hotel_Gaming Industry and the S&P 500

The price-to-earnings ratio (P/E) is a relatively popular metric used by investors and analysts for valuing a company’s stock. The P/E ratio can be used to show how a stock’s valuation compares to other companies and the total market. Investors use the P/E ratio to determine what the market is willing to pay today based on a company’s past or future earnings. A high P/E ratio could mean that a stock’s price is too high relative to earnings, which could be a signal that a stock is currently overvalued. In turn, a low P/E ratio could indicate that a company’s current stock price is low relative to earnings. 

Inspired Entertainment does not currently have a reported P/E ratio. The P/E for the Hotel/Gaming industry is 64.14 and the P/E for the S&P 500 is 29.77.

What is the current Price-to-Sales Ratio (P/S) for Inspired Entertainment?

The Price-to-Sales Ratio (P/S) looks at a company’s market cap and revenue to determine valuation. The P/S ratio is calculated by taking a company’s market cap and dividing by the total sales or revenue. The P/S ratio gives an idea of how much the market values every dollar of a company’s sales and can be effective in valuing unprofitable growth stocks or companies that are currently undergoing special situations or challenges. A lower the P/S ratio can be an indicator of good value.

Inspired Entertainment is currently trading at a P/S of 1.39. The P/S for the Hotel/Gaming industry is 5.54 and the P/S for the S&P 500 is 3.23.

How does Inspired Entertainment Price-to-BookRatio (P/B) compare to the Hotel/Gaming industry?

Price-to-book value (P/B) is the ratio of the market value of a company’s shares divided by its book value of equity (the value of it’s assets on the books). The book value is the difference between the book value of assets and liabilities. Typically, investors use the P/B ratio to assess if a stock is valued properly (a value of one means that the stock price is trading in line with the book value of the company). A company with a high P/B ratio could mean the stock price is overvalued as well as the converse.

Inspired Entertainment does not currently have a reported P/B ratio. The P/B for the Hotel/Gaming industry is 6.10 and the P/B for the S&P 500 is 4.87.

How attractive is Inspired Entertainment Return on Invested Capital (ROIC) to investors?

Inspired Entertainment (INSE)_ Return on Invested Capital in Comparison to the Hotel_Gaming Industry and the S&P 500

Investors use the return on invested capital (ROIC) to assess how efficient a company is at turning capital into profits. The ROIC is the amount of money a company makes on it’s investments that is above the average cost of debt and equity.

Investors can use the ROIC to provide context for metrics like the (P/E) ratio. For instance, when used in isolation a low P/E ratio could suggest a company is oversold but the decline could be because a company is no longer generating value for shareholders. Conversely, companies that consistently generate high rates of ROIC can plausibly trade at a premium compared to other stocks, even if their P/E ratios are high.

Inspired Entertainment ROIC is currently -13.42% in comparison to -1.33% for the Hotel/Gaming industry and 8.60% for the S&P 500.

Inspired Entertainment(INSE)_ Price Target & 52-Week Price Range (1)

How has INSE stock performed over the past year? What is the current analyst price target?

Over the past 52 weeks, Inspired Entertainment has traded between the range of $5.76 and $15.81.

The current Analyst Price Target for Inspired Entertainment is $18.46.

What is Inspired Entertainment YTD Performance in comparison to its industry and the total market?

The year-to-date (YTD) performance is the amount of profit/loss realized by a stock since the first trading day of the current calendar year. 

The YTD performance for Inspired Entertainment is 90.88%. The Hotel/Gaming industry has a YTD performance of 14.21% in comparison to the YTD S&P 500 performance of 27.43%.

Inspired Entertainment (INSE)_ YTD Performance in Comparison to the Hotel_Gaming Industry and the S&P 500

Recent Financial Results (Q3, 2021)

  • Total Revenue of $77.6M, an increase of 29% YoY, compared to $60.1M in prior year period
  • Interactive Revenue segment increased 73.4% YoY
  • Net Income increased to a quarterly record of $25M
  • Adjusted EBITDA of $30.1M (management Q3 guidance range was between $28M to $30M)
  • Generated $19.8M in operating cash flow

Stock Price Target: $$18.46

Company Overview

INSE Stock Rating

Inspired Entertainment is a business-to-business gaming technology company, supplies virtual sports and server based gaming (SBG) products to regulated lottery, betting, and gaming operators worldwide. The company operates through four segments: Gaming, Virtual Sports, Interactive, and Leisure.

The company supplies gaming terminals and software to betting offices, casinos, gaming halls and other gaming centers, through its portfolio of games provided in digital terminals under the following brands: Centurion, Super Hot Fruits and traditional casino games, such as roulette, blackjack, and numbers games.

Inspired Entertainment is headquartered in New York, New York. The current CEO is Brooks Pierce.

Be sure to add Inspired Entertainment (INSE) to your Watch List and if you haven’t done so already, check in on the performance of our Current Portfolio. Keep it simple and always do your due diligence.

This material is provided for informational purposes only and is not financial advice. The information contained herein should not solely be used for the formation of an investment decision, whether you are a long term or short term investor.