At $9.10 USD, Is Inspired Entertainment, Inc. (NASDAQ:INSE) worth a close look?

Inspired Entertainment, Inc. (NASDAQ: INSE), is not the largest company in the market, but its stock price has seen significant movements over the past few months on the NASDAQCM, reaching highs of $10.00 US and falling to lows of US$8.46. Certain stock price movements can give investors a better opportunity to enter the stock and potentially buy at a lower price. One question that needs to be answered is whether Inspired Entertainment's current price of US$9.10 reflects the true value of the small cap? Or is it currently undervalued, giving us an opportunity to buy? Let's take a look at Inspired Entertainments' outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Inspired Entertainment

What is the opportunity for inspired entertainment?

Inspired Entertainment is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio relative to the industry average. In this case, we used the price-to-earnings (PE) ratio since there is not enough information to reliably forecast the stock's cash flows. We note that Inspired Entertainments' ratio of 73.27x is higher than its peer average of 19.52x, suggesting that the stock is trading at a premium to the Hospitality sector. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since the Inspired Entertainments share price is quite volatile, this could mean that it could fall (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator of how the stock is doing relative to the rest of the market.

Can we expect growth from Inspired Entertainment?

Future outlook is an important aspect when considering buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a strong outlook at a cheap price is always a good investment, so let's also take a look at the company's future expectations. With profits expected to more than double over the next two years, the future looks bright for Inspired Entertainment. It looks like higher cash flow is on the cards for the stock, which should translate into a higher share valuation.

What this means for you

Are you a shareholder? It appears that the market has well and truly priced in INSE's positive outlook, with shares trading above sector price multiples. At the current price, shareholders may be asking a different question: Should I sell? If you believe INSE should trade below its current price, selling high and buying it back when its price drops toward the industry PE ratio can be profitable. But before making this decision, check if its fundamentals have changed.

Are you a potential investor? If you've been following INSE for a while, now may not be the best time to get into the stock. The price has outperformed its industry peers, meaning there is likely no longer any upside from mispricing. However, the optimistic outlook is encouraging for INSE, meaning it is worth delving deeper into other factors in order to take advantage of the next price drop.

With this in mind, we would not consider investing in a stock without a thorough understanding of the risks. To help you, we have discovered 4 warning signs (2 make us uncomfortable!) which you should be aware of before buying Inspired Entertainment stock.

If you are no longer interested in Inspired Entertainment, you can use our free platform to view our list of over 50 other stocks with strong growth potential.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to constitute financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your objectives or your financial situation. Our goal is to provide you with targeted, long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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