Although it is a higher risk, the Catapult Group International Ltd (ASX: CAT) share price could catch the market by surprise.
Who is Catapult?
Catapult is a Melbourne-based sports analytics business, developing GPS-type devices which tuck into the uniform (between the shoulders) of professional sports athletes.
Given it is a $330 million tech business in the sports industry, Catapult shares spent a few years as a market darling (read: hot tech stock). Then, recently, it started to dive.
CAT share price
The recent selloff appears to be a result of some weak quarterly cash flow numbers and the company's capital raisings. The company says it will use the proceeds of its latest raising to bolster its day-to-day expenses and make two acquisitions.
While a selloff is painful for existing shareholders, it can present an opportunity for investors. In my opinion, long-term investors should have Catapult shares on their watchlist.
As the leading provider of sports wearables — it has one major competitor — with high amounts of customer retention (around 1% to 1.5% leave each year), Catapult should provide a better experience for its customers (aka raise its prices) over time. However, it has also made a few acquisitions in recent years.
In a traditional sense, Catapult shares are not cheap. The company trades at six times revenue and does not make a profit. Therefore, it has a lot of growth potential baked into the current valuation.
Foolish Takeaway
Undoubtedly, Catapult is a higher-risk investment. However, I think Catapult could be a good long-term investment if it can continue to capture more teams, in both its video analytics and wearables businesses.
