The Catapult Group International Ltd (ASX: CAT) share price has been hammered this year, falling 63% to $1.30. Despite significant revenue growth both organically and via acquisition, it seems as though investors have lost patience with the company's continual cash losses.
The opportunity
On the face of it, Catapult's value proposition is much the same as its always been – selling wearable devices (that provide detailed analytics) to sports teams. It has around 12% market penetration in the elite sports market, and sees considerable growth opportunities both here and in the 'prosumer' market, which is many times larger. Catapult also has other growth opportunities via cross-selling its ClearSky and Athlete Management System.
The risks
However, Catapult's expenses are also growing at a rapid rate, and the company burns a large amount of cash – it lost $6.3 million from ongoing operations last year, and has $16 million in the bank. While that's enough to sustain more than two years of continued growth, with the company increasing its investment spending it looks as though Catapult may require additional funds in time.
There are also significant risks around the integration and ongoing performance of Catapult's numerous recent acquisitions, many of which have not been in the stable long enough for investors to get a good picture of their performance.
On top of this, Catapult's prosumer offering – the company's 'blue sky' potential – hasn't gained much traction although the recent relaunch suggests that could be improving.
The bottom line
With a market capitalisation of $218 million, Catapult Group is definitely priced for growth. However, the company has compelling technology, is making progress, and has a market opportunity that could see it become considerably larger in time. While it is risky, I would be more inclined to buy than sell today. I would consider taking a small position in Catapult and seeing how it progresses over time.
