In the share market sentiment can drive share prices to exaggerated highs or lows depending on how investors and technical traders feel about a business regardless of estimates of its intrinsic value.
For example the Catapult Group Ltd (ASX: CAT) share price has gone from 61 cents on February 7 2019 to $1.22 this morning despite the business simply reaffirming full year revenue and underlying EBITDA guidance for the period of $73.4 million and $8 million respectively.
It also revealed the signing of a couple of new deals with the NFL and national sports teams to help swing sentiment from maximum despondency to moderate optimism with the resulting 100% rise in its share price in just over 2 months.
Moreover, Catapult is also a software-as-a-service business trading on a potentially bargain valuation compared to some of its larger rivals that are market darlings at the opposite end of the sentiment scale to Catapult.
For example WiseTech Global Ltd (ASX: WTC) trades on 22x its forecast for sales of $330 million in fiscal 2019, compared to Catapult at around just 3x its forecast for sales.
In other words we could easily make the case for Catapult's share price tripling again if it regained the kind of market darling status bestowed on other software businesses that admittedly have different business models and levels of profitability.
As such Catapult looks a high risk / high reward play, but for now I'm not a buyer of Catapult shares as I'm not enthused by its push into what it calls the 'prosumer' or amateur athlete space.
