Inspired Entertainment: Unlocking Hidden Value in the Gaming Industry

Inspired Entertainment, Inc. (NASDAQ:INSE) has been making waves in the gaming industry, with its innovative products and strategic partnerships driving growth and enhancing its intrinsic value. The company's recent financial results and business highlights have caught the attention of investors, with its intrinsic value potentially 67% above its share price. Let's delve into the factors contributing to this discrepancy and explore the opportunities that lie ahead for Inspired Entertainment.

Innovation and Product Offering Expansion

Inspired Entertainment has consistently demonstrated its ability to innovate and stay ahead of the competition. The launch of Hybrid Dealer, a unique iGaming product that seamlessly blends physical and digital elements, showcases the company's commitment to pushing the boundaries of online gaming. This product offers operators unlimited branding and customizable possibilities, making it an attractive offering for online gaming platforms. By expanding its product portfolio, Inspired Entertainment can tap into new markets and customer segments, driving growth and increasing its intrinsic value.

The expected launch of an NBA-themed Virtual Sports game in the second quarter of 2024 further expands the company's content offerings, catering to an expanding customer base, including North America and Latin America. This expansion can lead to increased revenue and market share, contributing to the company's intrinsic value.

Partnership Expansion and Strategic Alliances

Inspired Entertainment's strong relationships with key industry players have led to strategic partnerships that drive growth and enhance its intrinsic value. The agreement with Kambi Group plc to integrate Virtual Sports products in the Kambi sportsbook platform and the expanded partnership with FanDuel in North America to deliver iGaming content across multiple states indicate the company's ability to secure significant deals with prominent clients. These partnerships can result in increased revenue, market share, and brand recognition, ultimately driving the company's intrinsic value.

The major contract with Mecca Bingo for the installation of 170 new machines across the UK estate demonstrates the company's ability to secure significant deals with prominent clients. This contract can result in increased revenue and recurring revenue streams, contributing to the company's intrinsic value.

Strategic Focus on Higher-Margin Digital Verticals and Land-Based Operations

Inspired Entertainment's strategic focus on scaling higher-margin digital verticals and optimizing land-based operations has a positive impact on its intrinsic value. The company's digital business, particularly the Interactive segment, has seen significant growth in revenue and Adjusted EBITDA, increasing approximately 41% and 39% year-over-year on a constant currency basis, respectively. This growth is driven by new customer launches and the expansion of the existing customer base. The roll-out of new 'Vantage' terminals has led to low double-digit year-over-year revenue per machine increases across two of the company's largest licensed betting shop customers. The success of the 'Vantage' cabinet rollout gives the company confidence in ongoing growth across its land-based gaming portfolio, further enhancing its intrinsic value.



Analyst Consensus and Valuation

According to 5 analysts, the average rating for INSE stock is "Buy," with a 12-month stock price forecast of $14.6, which is an increase of 41.75% from the latest price. This analyst consensus further supports the idea that the stock may be undervalued. Inspired Entertainment's forward adjusted P/E of 10.30 is more than 40% below its sector median, corroborating the assessment that the stock is undervalued relative to its best-in-class growth potential.

In conclusion, Inspired Entertainment's intrinsic value is potentially 67% above its share price, driven by its innovative products, strategic partnerships, and focus on higher-margin digital verticals and land-based operations. The company's ability to execute on its growth strategy, as evidenced by its recent business highlights and financial results, makes it an attractive investment opportunity. As the global online betting and gaming ecosystem continues to evolve, Inspired Entertainment is well-positioned to capitalize on the expanding markets and drive long-term growth.