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One Thing To Remember About The Inspired Entertainment, Inc. (NASDAQ:INSE) Share Price

If you own shares in Inspired Entertainment, Inc. (NASDAQ:INSE) then it's worth thinking about how it contributes to the volatility of your portfolio, overall. In finance, Beta is a measure of volatility. Volatility is considered to be a measure of risk in modern finance theory. Investors may think of volatility as falling into two main categories. The first category is company specific volatility. This can be dealt with by limiting your exposure to any particular stock. The second type is the broader market volatility, which you cannot diversify away, since it arises from macroeconomic factors which directly affects all the stocks on the market.

Some stocks are more sensitive to general market forces than others. Beta can be a useful tool to understand how much a stock is influenced by market risk (volatility). However, Warren Buffett said 'volatility is far from synonymous with risk' in his 2014 letter to investors. So, while useful, beta is not the only metric to consider. To use beta as an investor, you must first understand that the overall market has a beta of one. A stock with a beta greater than one is more sensitive to broader market movements than a stock with a beta of less than one.

See our latest analysis for Inspired Entertainment

What does INSE's beta value mean to investors?

Given that it has a beta of 1.25, we can surmise that the Inspired Entertainment share price has been fairly sensitive to market volatility (over the last 5 years). If the past is any guide, we would expect that Inspired Entertainment shares will rise quicker than the markets in times of optimism, but fall faster in times of pessimism. Share price volatility is well worth considering, but most long term investors consider the history of revenue and earnings growth to be more important. Take a look at how Inspired Entertainment fares in that regard, below.

NasdaqCM:INSE Income Statement, January 18th 2020
NasdaqCM:INSE Income Statement, January 18th 2020

How does INSE's size impact its beta?

With a market capitalisation of US$149m, Inspired Entertainment is a very small company by global standards. It is quite likely to be unknown to most investors. Relatively few investors can influence the price of a smaller company, compared to a large company. This could explain the high beta value, in this case.

What this means for you:

Since Inspired Entertainment tends to moves up when the market is going up, and down when it's going down, potential investors may wish to reflect on the overall market, when considering the stock. In order to fully understand whether INSE is a good investment for you, we also need to consider important company-specific fundamentals such as Inspired Entertainment’s financial health and performance track record. I highly recommend you dive deeper by considering the following:

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  1. Future Outlook: What are well-informed industry analysts predicting for INSE’s future growth? Take a look at our free research report of analyst consensus for INSE’s outlook.

  2. Past Track Record: Has INSE been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of INSE's historicals for more clarity.

  3. Other Interesting Stocks: It's worth checking to see how INSE measures up against other companies on valuation. You could start with this free list of prospective options.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.