Catapult Group International Group (ASX: CAT) shares were up nearly 8% yesterday following the company’s presentation at the Bell Potter investor conference. Here’s what you need to know.
Who is Catapult Group?
Catapult Group International Limited (CAT) is a global sports analytics company that provides elite sporting organisations and athletes with detailed, real-time data and analytics to monitor and measure athletes. Its products are now used by approximately 3,000 sporting teams from all around the world.
Catapult’s Rapid Growth Set To Continue
Catapult is a business that is growing rapidly. Whilst it’s still running at a loss it now seems a matter of time before it reaches profitability with sales growing rapidly year on year. Annual recurring revenue increased by 18% in FY19 and the company achieved positive earnings before interest, tax, depreciation, and amortisation (EBITDA) for the first time in its history.
However, those results were delivered to investors late last month so there was nothing new in any of that. What had investors clamoring to get a piece of the action was the positive outlook statement provided by management at yesterday’s conference. Catapult stated that the positive sales momentum had continued into FY20 and importantly reaffirmed its aim of reaching positive free cash flow by FY21.
The Catapult share price has been volatile over the past 12 months dropping to a low of 60 cents in February before reaching yesterday’s high.
Cracking the Amateur Market
The future success of Catapult may hang on its ability to crack into what it calls the ‘Prosumer’ market. Made up of amateur athletes the company will be hoping to sell its data analytics products far and wide to a range of teams and sports-loving individuals keen to follow the trends set by their favourite sporting stars and organisations.
Revenue from Catapult’s Prosumer division was just $5.3 million in FY19 but is showing signs of gaining traction as evidenced by the 54% increase from a year earlier.
Buy, Hold or Sell?
Catapult is an exciting growth story that looks to have plenty of potential if management can execute their plan successfully. Given they operate with high gross margins if they get things right, increasing sales will quickly translate into higher profits and likely a higher share price.
Fast-growing companies such as Catapult inevitably run into speed bumps along the way and whilst it may mean I miss my opportunity I will be waiting patiently for one such speed bump for my opportunity to buy shares.
Given they are not yet profitable I demand a larger margin of safety and, therefore, I’d need to see the share price below $1 before I’d buy based on the currently available information.
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At the time of publishing, Luke does not have a financial interest in any of the companies mentioned.
