Inspired Entertainment (INSE) AI Stock Analysis

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Inspired Entertainment

(NASDAQ:INSE)

65Neutral

Inspired Entertainment demonstrates strong revenue and profitability growth, particularly in the Interactive and U.S. markets, which supports a positive outlook. However, the company's high leverage and balance sheet instability pose significant risks. Technical indicators suggest caution with a bearish trend, yet the low P/E ratio indicates potential undervaluation. While the earnings call highlighted impressive digital growth and successful refinancing, regulatory and market challenges need addressing. Overall, the stock is moderately attractive with potential upside if financial stability improves.

Positive Factors

Earnings Beat

Inspired Entertainment reported 3Q24 EBITDA of $30M, beating consensus expectations by 3%.

Interactive Division Growth

Interactive division increased EBITDA by 47% and beat consensus by 13%.

Strategic Partnerships

The hybrid dealer product continued to make progress with a strategic partnership with FanDuel, one of the largest gaming operators in the United States.

Negative Factors

Gaming Segment Decline

Gaming 2Q revenues and EBITDA declined by 13% and 12% year-over-year.

Valuation Concerns

Shares of INSE are currently trading sub-5x EV/EBITDA, below peers, recent supplier M&A transactions, and its historic levels.

Virtual Sports Challenges

Virtual Sports continues to face headwinds resulting in EBITDA being 16% below consensus.

Inspired Entertainment (INSE) vs. S&P 500 (SPY)

Market Cap

$219.87M

Dividend YieldN/A

Average Volume (3M)130.04K

Price to Earnings (P/E)3.4

Beta (1Y)1.15

Revenue Growth-7.53%

EPS Growth2035.55%

CountryUS

Employees1,420

SectorConsumer Cyclical

Sector Strength67

IndustryGambling, Resorts & Casinos

Share Statistics

EPS (TTM)0.00

Shares Outstanding26,912,200

10 Day Avg. Volume128,684

30 Day Avg. Volume130,043

Financial Highlights & Ratios

PEG Ratio<0.01

Price to Book (P/B)-67.39

Price to Sales (P/S)0.00

P/FCF Ratio17.34

Enterprise Value/Market Cap2.42

Enterprise Value/Revenue0.43

Enterprise Value/Gross Profit2.88

Enterprise Value/Ebitda1.72

Forecast

1Y Price Target

$12.50

Price Target Upside47.23% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering4

Inspired Entertainment Business Overview & Revenue Model

Company DescriptionInspired Entertainment, Inc., a business-to-business gaming technology company, supplies content, platform, and other products and services to regulated lottery, betting, and gaming operators worldwide. The company operates through four segments: Gaming, Virtual Sports, Interactive, and Leisure. The Gaming segment supplies gaming terminals and software to betting offices, casinos, gaming halls, and high street adult gaming centers; a portfolio of games through its digital terminals under the Centurion and Super Hot Fruits names; and traditional casino games, such as roulette, blackjack, and number games. The Virtual Sports segment designs, develops, markets, and distributes ultra-high-definition sports games that include greyhounds, tennis, motor racing, cycling, cricket, speedway, golf, and dart, and other horse racing games under the V-Play Soccer, V-Play Football, V-Play Basketball, Virtual Grand National, and V-Play NFLA names. The Interactive segment provides a range of premium random number generated casino content from feature-rich bonus games to European-style casino free spins and table games. The Leisure segment supplies gaming terminals and amusement machines in pubs, bingo halls, and adult gaming centers, as well as family entertainment centers, bowling centers, and other entertainment venues. Inspired Entertainment, Inc. is headquartered in New York, New York.

How the Company Makes MoneyInspired Entertainment generates revenue through several key streams. The company earns money by supplying its virtual sports and gaming content to both land-based and online operators, who pay licensing and service fees to access these products. Additionally, Inspired Entertainment sells and leases electronic gaming machines to retail gaming venues, deriving income from both direct sales and ongoing maintenance agreements. The company also benefits from revenue-sharing arrangements with its clients, where a portion of the gaming revenue generated through their products is shared with Inspired. Significant partnerships with major gaming operators and continued expansion into new markets further contribute to the company's financial performance.

Inspired Entertainment Financial Statement Overview

Summary

Inspired Entertainment shows strong revenue and profit growth, despite high leverage and negative equity. Improved cash flow is a positive, but past volatility suggests careful management is needed.

Income Statement

Positive

Inspired Entertainment shows a strong recovery in net income and revenue growth over the years. The gross profit margin remains impressive, with a significant increase in net profit margin from prior years. However, the EBIT and EBITDA margins have shown some volatility, indicating room for improvement in operational efficiency.

Balance Sheet

Neutral

The company has a high debt-to-equity ratio due to negative stockholders' equity, indicating significant leverage risk. The equity ratio is also negative, highlighting potential financial instability. While asset growth is noted, the heavy reliance on debt poses a risk to financial health.

Cash Flow

Positive

Cash flow analysis reveals a positive trend in operating cash flow and recent improvements in free cash flow. The free cash flow to net income ratio is promising, yet the company's historical volatility in free cash flow suggests potential liquidity concerns.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
297.10M	323.00M	285.40M	208.90M	199.80M
	Gross Profit
204.80M	155.40M	213.40M	158.20M	155.30M
	EBIT
30.70M	39.90M	48.90M	3.70M	8.80M
	EBITDA
78.90M	84.00M	90.70M	53.90M	53.00M
	Net Income Common Stockholders
64.80M	7.60M	20.60M	-36.70M	-29.20M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
29.30M	40.00M	25.00M	47.80M	47.10M
	Total Assets
438.40M	340.90M	309.40M	331.70M	324.10M
	Total Debt
350.80M	331.50M	288.50M	322.50M	311.10M
	Net Debt
321.50M	291.50M	263.50M	274.70M	264.00M
	Total Liabilities
441.70M	418.90M	367.10M	409.70M	412.80M
	Stockholders Equity
-3.30M	-78.00M	-57.70M	-78.00M	-88.70M
Cash Flow		Free Cash Flow
2.90M	-2.30M	-5.00M	-19.20M	23.00M
	Operating Cash Flow
31.70M	45.50M	34.80M	6.20M	52.90M
	Investing Cash Flow
-40.10M	-48.40M	-40.40M	-37.90M	-29.90M
	Financing Cash Flow
-1.60M	16.20M	-11.10M	31.20M	-8.20M

Inspired Entertainment Technical Analysis

Technical Analysis Sentiment

Positive

Last Price8.49

Price Trends

50DMA

8.08

Positive

100DMA

8.92

Negative

200DMA

9.08

Negative

Market Momentum

MACD

>-0.01

Negative

RSI

61.72

Neutral

STOCH

69.01

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For INSE, the sentiment is Positive. The current price of 8.49 is above the 20-day moving average (MA) of 7.59, above the 50-day MA of 8.08, and below the 200-day MA of 9.08, indicating a neutral trend. The MACD of >-0.01 indicates Negative momentum. The RSI at 61.72 is Neutral, neither overbought nor oversold. The STOCH value of 69.01 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for INSE.

Inspired Entertainment Risk Analysis

Inspired Entertainment disclosed 50 risk factors in its most recent earnings report. Inspired Entertainment reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Inspired Entertainment Peers Comparison

Overall Rating

UnderperformOutperform

Sector (61)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
GAMB	76 Outperform	$493.98M	17.09	25.34%	―	17.05%	73.00%
INSE	65 Neutral	$219.87M	3.38	-12.77%	―	-7.53%	2035.55%
AGS	65 Neutral	$503.46M	10.59	49.64%	―	6.60%	778.46%
Sector *	61 Neutral	$6.93B	11.84	2.89%	3.91%	2.59%	-21.68%
FLL	52 Neutral	$120.16M	―	-79.70%	―	13.92%	-54.82%
GAN	46 Neutral	$87.81M	―	229.13%	―	7.02%	74.19%

* Consumer Cyclical Sector Average

Performance Comparison

INSE

Inspired Entertainment

8.49

-0.25

-2.86%

FLL

Full House Resorts

3.67

-1.47

-28.60%

AGS

Playags

12.17

0.72

6.29%

GAN

1.86

0.47

33.81%

CDRO

Codere Online

8.25

1.23

17.52%

GAMB

Gambling.com

14.58

6.08

71.53%

Inspired Entertainment Earnings Call Summary

Earnings Call Date:May 08, 2025

(Q1-2025)

% Change Since: 13.65%|

Next Earnings Date:Aug 07, 2025

Earnings Call Sentiment Positive

The earnings call presented a mixed outlook, with strong growth in the Interactive and U.S. markets and successful refinancing efforts. However, challenges in Brazil, holiday timing issues, and a decline in Virtual Sports highlighted areas of concern. Overall, the positive growth in digital segments and refinancing outweigh the negatives.

Q1-2025 Updates

Positive Updates

Strong Growth in Interactive Segment

The Interactive business showed significant growth with revenue increasing 49% and adjusted EBITDA increasing 79% over Q1 2024. Margins expanded from 54% to 64% in 2025.

Successful Debt Refinancing

The company successfully negotiated the refinancing of its existing bonds with a new 5-year sterling-denominated floating rate financing, providing greater flexibility and expected rate reductions.

Expansion in North America

The U.S. business grew by 90% against a market growth of about 20%, highlighting strong content and account management quality.

New Product Launches in Virtual Sports

Key initiatives in Virtual Sports, including licensed content launches in North America, a new Brazil-specific soccer game, and expansion in Greece and Turkey, are expected to drive growth.

Promising Hybrid Dealer Product

The Hybrid Dealer product, including branded wheel games and new derivatives, is scaling rapidly with major operators like BetMGM and Caesars.

Negative Updates

Regulatory Challenges in Brazil

The company faced disturbances due to new regulations and taxes in Brazil, impacting the Virtual Sports business.

Impact of U.K. Easter Holiday Shift

The Leisure business was negatively affected by the shift of the U.K. Easter holiday from Q1 to Q2, impacting performance.

Virtual Sports Segment Decline

Despite recovery efforts, the Virtual Sports segment experienced a year-over-year quarterly decline in EBITDA.

Macro Challenges in the U.K. Retail Sector

The U.K. retail market is experiencing challenges, with softness reported in customers other than William Hill.

Company Guidance

During the Inspired Entertainment First Quarter 2025 Conference Call, the company reported a strong performance with a first-quarter adjusted EBITDA of approximately $18.5 million, reflecting a growth of nearly 20% compared to the previous year. The Interactive segment showed remarkable growth, with revenue increasing by 49% and adjusted EBITDA rising by 79% over Q1 2024, while margins expanded from 54% to 64%. The U.S. market grew by 90% against a 20% underlying market growth, underscoring the effectiveness of their content and account management. Additionally, the company successfully renegotiated its debt, replacing existing bonds with a five-year sterling-denominated floating rate financing, which is expected to provide greater flexibility for future operations. The company also plans to sell its holiday park business to further deleverage and reduce annual CapEx to around $25 million. Despite challenges in the Leisure business and disturbances in Brazil due to new regulations, the company expressed confidence in the stabilization and future growth of its Virtual Sports segment.

Inspired Entertainment Corporate Events

Executive/Board Changes

Inspired Entertainment Extends Leadership Employment Terms

Neutral

Feb 4, 2025

On January 29, 2025, Inspired Entertainment announced extensions to the employment terms for Executive Chairman A. Lorne Weil and CEO Brooks H. Pierce, effective January 1, 2025. These extensions include increased base salaries and target bonus opportunities, with Weil’s term extended to December 31, 2028, and Pierce’s to December 31, 2027, reflecting the company’s commitment to retain its leadership team.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.