Catapult Group International Ltd (ASX:CAT) shares drop lower on quarterly update

The Catapult Group International Ltd (ASX:CAT) share price has dropped lower after releasing its quarterly update. Should you buy this beaten down tech share?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It has been a disappointing day of trade so far for the Catapult Group International Ltd (ASX: CAT) share price.

In late morning trade the sports analytics and wearables company's shares are down almost 3% to $1.20 following the release of its latest quarterly update.

What was in the update?

According to today's release, Catapult's preliminary unaudited revenue for FY 2018 is $75.8 million, representing growth of 26% on a reported basis and 19% on a pro forma basis. Its unaudited group earnings before interest, tax, depreciation, and amortisation (EBITDA) came in at $0.6 million.

Both these figures are in line with the guidance management provided for the full-year and were driven largely by the growth of its Elite Wearables business.

Revenue in the segment grew 29% on the prior corresponding period to $34 million. In addition to this, the segment finished the year with annualised recurring revenues (ARR) of $24.4 million, also up 29% year-on-year.

Subscriptions now account for 60% of Elite Wearables revenue, up slightly from 58% in FY 2017.

Its biggest segment, Elite Video, didn't have quite as strong a year. It achieved revenue of $39.4 million during the period, up 9% on a pro forma constant currency basis. Segment ARR grew just 5% to $28.4 million.

Its Prosumer business has had a strong start but has yet to generate material revenues. It delivered revenue of $3.4 million in FY 2018, up from $1 million a year earlier.

This sales growth led to a net operating cash flow of $1.5 million in the fourth quarter, an improvement of $7.3 million on the prior corresponding period. As a result, FY 2018 net operating cash flow came in at $6.4 million, marking the first full year of positive operating cash flow for Catapult.

However, due to ~$5 million cash outflow from investing activities, the company finished the period with a cash balance of $31.7 million, down $3.2 million from the end of the last quarter.

Should you invest?

With Catapult's shares trading within sight of their 52-week low, they certainly are a tempting option. Especially with its operating cash flows now positive and its sizeable cash balance.

However, I'm still not ready to invest just yet. I intend to hold out for a few more quarters of strong revenue growth and improving operating cash flows before making a move.

Until then, I would prefer to invest in fast-growing and profitable tech shares such as Citadel Group Ltd (ASX: CGL) and Altium Limited (ASX: ALU).

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Catapult Group International Ltd. The Motley Fool Australia owns shares of Altium and Citadel Group Ltd. 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 Scott Phillips.

More on Share Fallers

A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.
Share Fallers

ASX 200 insider buys up another $2,000,000 in company stock following Wednesday's 15% crash

This director took Buffett's advice to heart this week.

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why AIC Mines, Fletcher Building, Nufarm, and Wesfarmers shares are dropping

These shares are having a tough finish to the week. But why?

Read more »

a woman holds her hands to her temples as she sits in front of a computer screen with a concerned look on her face.
Share Fallers

Why BHP, Nufarm, Peninsula Energy, and Regis Resource shares are sinking today

These ASX shares are having a tough session on Thursday. But why?

Read more »

A young male investor wearing a white business shirt screams in frustration with his hands grasping his hair after ASX 200 shares fell rapidly today and appear to be heading into a stock market crash
Share Fallers

Why Eagers Automotive, Inghams, Patriot Battery Metals, and Wildcat shares are sinking

These shares are having a tough time on hump day. But why?

Read more »

A man holds his hands to the sides of his face and pulls it down in despair as he sits at the wheel of a car that is not moving, as though in a traffic jam.
Share Fallers

Why this $3.2 billion ASX 200 stock just crashed 19%

The ASX 200 stock is under heavy selling pressure on Wednesday. But why?

Read more »

A woman with a sad face looks to be receiving bad news on her phone as she holds it in her hands and looks down at it.
Share Fallers

Why Infratil, James Hardie, Sonic Healthcare, and Star Entertainment shares are sinking today

These shares are having a tough session on Tuesday. But why?

Read more »

Male doctor in a lab coat working at laptop looking serious.
Share Fallers

Why this ASX 200 healthcare stock is tumbling 6% today

Inflation pressures are claiming another victim as this healthcare giant lowers its FY24 expectations.

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why Core Lithium, Duratec, Galan Lithium, and Michael Hill shares are sinking today

These shares are starting the week in the red. But why?

Read more »