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This week's 16% return lifts Inspired Entertainment's (NASDAQ:INSE) shareholders' three-year earnings to 33%.

Buying low-cost index funds will give you average market returns. But when you invest in individual stocks, some are likely to underperform. Unfortunately for shareholders, Inspired Entertainment Inc. (NASDAQ:INSE) shares have fallen 33% over the past three years, failing to reach market returns. If you zoom in, the stock actually fell 11% last year.

After the big rally over the past week, it’s worth checking to see if the long-term returns came from improving fundamentals.

Inspired Entertainment is currently not profitable, so most analysts will focus on revenue growth to understand how fast the underlying business is growing. Shareholders of unprofitable companies typically expect significant increases in earnings. This is because rapid revenue growth can often be easily estimated to predict profits of sizeable magnitude.

Over the past three years, Inspired Entertainment’s revenue has grown 20% annually. This is much better than most loss making companies. During that time, the stock price he rose 10%. A decent return, but not impressive. Generally, the stock is expected to rise given the impressive earnings growth. It is possible that the stock was previously overvalued or that loss is worrying the market. But you might want to take a closer look at this.

The chart below shows how revenue and returns have changed over time (click the image to see exact values).

revenue and revenue growth
NasdaqCM: INSE Earnings and Earnings Growth Jul 31, 2022

It’s good to see there’s been a fair amount of insider buying in the last three months. it is positive. That said, we believe revenue and earnings growth trends are even more important factors to consider. If you’re considering buying or selling Inspired Entertainment stock, please visit here. freedom A report that shows an analyst’s profit forecast.

another point of view

The 11% total return that Inspired Entertainment’s shareholders received last year isn’t far from the -11% market return. The silver lining is that the long-term investor has achieved a 0.5% annual total return over his five years. If a shift in sentiment, rather than a downturn in the economy, affects stock prices, that could represent an opportunity. While it’s worth considering the various effects market conditions have on stock prices, there are other factors that are even more important. Like risk, for example.All companies have them and we found Two Warning Signs from Inspired Entertainment (one of which is important!) you need to know.

Entertainment Inspired isn’t the only stock insiders are buying.For those who like to search investment win this freedom A list of growing companies that recently made insider acquisitions could be just the ticket.

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

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This article by Simply Wall St is general in nature. We provide comments based on historical data and analyst projections using only unbiased methodologies and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. We aim to deliver long-term focused analysis based on fundamental data. Please note that our analysis may not take into account the latest price sensitive company announcements or qualitative materials. Is not …

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

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