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Can the Catapult Group share price bounce back from its recent 40% decline?

The Catapult Group International Ltd (ASX: CAT) share price has plunged 38% over the past 6 months, and is down nearly 50% from July’s high of $4.06 per share.

Investors were seemingly disappointed with the company’s results last year – revenue of $18 million and a loss of $3.5 million after tax – despite 63% growth in the total number of units sold. I agree that at $4 the company’s market capitalisation (~$700 million) looked rather high. However, with Catapult shares now trading at a 52-week low, it might be time for another look at the business.

Revenue growth in the core business remains modest, and is forecast to grow between 21% and 30% for the full year. However, several acquisitions were made recently and the company’s statutory results will be much higher. This has also broadened the company’s analytical capability and should allow for some up-selling or cross-selling.

Is Catapult a buy?

At today’s prices, and still unprofitable, Catapult is not a conventional ‘value’ business – investors are effectively paying for the growth that Catapult could deliver. Fortunately, continued strong uptake from pro sporting teams suggests that Catapult has a product that really works, and increased penetration globally (more players, more teams, and more leagues) gives a fair amount of room to grow.

I am less keen on the ‘prosumer’ segment, which is oriented to more regular sportspeople, although I can’t deny that there is definitely an underserved market when it comes to retail customer access to analytic data. This is another opportunity for Catapult to leverage its existing technology and should not overlooked.

While the company continues to grow and makes progress towards generating positive cash-flow and breaking even, there is a good case to be made for including Catapult as a small, higher-risk part of your portfolio.

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Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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