Critical Comparison: Inspired Entertainment (INSE) versus American Software (AMSWA)

Inspired Entertainment (NASDAQ:INSE) and American Software (NASDAQ:AMSWA) are both small-cap business services companies, but which is the superior investment? We will contrast the two companies based on the strength of their valuation, profitability, risk, institutional ownership, earnings, dividends and analyst recommendations.

Volatility and Risk

Inspired Entertainment has a beta of -0.07, suggesting that its share price is 107% less volatile than the S&P 500. Comparatively, American Software has a beta of 0.76, suggesting that its share price is 24% less volatile than the S&P 500.



Profitability

This table compares Inspired Entertainment and American Software’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Inspired Entertainment -12.74% N/A -8.53%
American Software 9.46% 9.02% 6.37%

Analyst Recommendations

This is a summary of current ratings and target prices for Inspired Entertainment and American Software, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Inspired Entertainment 0 0 1 0 3.00
American Software 0 1 0 0 2.00

American Software has a consensus target price of $13.00, suggesting a potential upside of 15.25%. Given American Software’s higher probable upside, analysts clearly believe American Software is more favorable than Inspired Entertainment.

Dividends

American Software pays an annual dividend of $0.44 per share and has a dividend yield of 3.9%. Inspired Entertainment does not pay a dividend. American Software pays out 122.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. American Software has raised its dividend for 2 consecutive years.

Earnings and Valuation

This table compares Inspired Entertainment and American Software’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Inspired Entertainment $122.54 million 1.23 -$49.11 million ($2.68) -2.61
American Software $112.70 million 3.09 $12.05 million $0.36 31.33

American Software has lower revenue, but higher earnings than Inspired Entertainment. Inspired Entertainment is trading at a lower price-to-earnings ratio than American Software, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

33.7% of Inspired Entertainment shares are owned by institutional investors. Comparatively, 75.4% of American Software shares are owned by institutional investors. 21.8% of Inspired Entertainment shares are owned by company insiders. Comparatively, 11.2% of American Software shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Summary

American Software beats Inspired Entertainment on 12 of the 17 factors compared between the two stocks.

About Inspired Entertainment

Inspired Entertainment, Inc., a games technology company, focuses on the development and sale of software systems and digital terminals worldwide. The company operates through two segments, Service Based Gaming (SBG) and Virtual Sports. The SBG segment designs, develops, markets, and distributes a portfolio of products and services through its digital network architecture to betting offices, casinos, gaming hall and bingo operators, and lotteries, as well as government affiliated and licensed operators. The Virtual Sports segment offers gaming software and content to regulated betting operators, lotteries, casinos, online operators, and other gaming and lottery operators. It operates approximately 25,000 digital gaming terminals; and supplies its virtual sports products in approximately 35,000 venues and approximately 100 Websites. The company was founded in 2002 and is headquartered in London, the United Kingdom.

About American Software

American Software, Inc. develops, markets, and supports a portfolio of software and services worldwide. It operates in three segments: Supply Chain Management (SCM), Information Technology (IT) Consulting, and Other. The SCM segment provides supply chain management and retail planning solutions, including sales and operations planning, demand and inventory optimization, manufacturing planning and scheduling, supply optimization, retail allocation and merchandise planning, and transportation optimization solutions to streamline and optimize the forecasting, inventory, production scheduling, production, supply, allocation, distribution, and management of products between trading partners. This segment also offers cloud solutions for supply chain management, product lifecycle management, vendor quality, and vendor compliance and corporate social responsibility for brand retailers and manufacturers; and analytics and business intelligence solutions for the supply chain market. The IT Consulting segment offers IT staffing and consulting services, such as professional services/product management/project management, staff augmentation, and social media and analytic marketing, as well as cloud, collaboration, network, and security services for software enhancement, documentation, update, customer education, consulting, systems integration, maintenance, and other support services. The Other segment provides purchasing and materials management, customer order processing, financial, e-commerce, and traditional manufacturing solutions. The company markets its products through direct and indirect sales channels to retail, apparel, footwear, consumer packaged goods, chemicals, oil and gas, life sciences, telecommunications, consumer electronics, industrial products, and other manufacturing industries. American Software, Inc. was founded in 1970 and is headquartered in Atlanta, Georgia.

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