The Catapult Group International Ltd (ASX: CAT) share price has surged 33% in the last 3 days. The positive price action follows a FY20 results preview that the company released to the market earlier this week.
So, can the Catapult share price go higher, and is now the time to invest?
Positive results preview
Earlier this week, Catapult released a preview of its unaudited earnings. The results were highlighted by the company generating net free cash of $9.0 million in FY20 and achieving cash flow positivity a year earlier than forecast.
Despite professional sports being postponed due to the coronavirus pandemic, Catapult was able to grow group revenue and earnings before interest, tax, depreciation and amortisation (EBITDA), which was fuelled by the company's scalable, subscription-based business model. Catapult expects total revenue for FY20 to be between $100 million to $101 million and EBITDA between $11.5 million and $12.5 million. Catapult also acknowledged the company's strong financial position, boasting $27.5 million cash on hand.
How has Catapult performed during the pandemic?
As indicated by the company's provisional results, Catapult has managed the pandemic relatively well. The company attributed this resilience to its subscription-based business model, which contributes approximately 75% to its revenue, along with the early implementation of cost control measures.
Although professional sporting leagues were postponed during the pandemic, Catapult managed to retain existing customers whilst also winning new clients. In an earlier update, the company noted that customers continued to purchase Catapult solutions during the height of the lockdown in order to prepare athletes for when competitions recommence.
Should you buy?
Catapult are world leaders in sports analytics and solutions, providing sports teams and athletes with technology that tracks and measures performance and recovery. The company's solutions cover 3 divisions: elite video, wearables, and prosumer products, which provide elite performers and teams with metrics and information they can use to tailor strategy, training and recovery regimes.
Catapult has more than 3,000 elite clients, including soccer giants Chelsea Football Club and Real Madrid FC. In Australia, the company also has long-term contracts with the National Rugby League (NRL), Australian Football League (AFL) and the National Basketball League (NBL). With the majority of these sports having resumed the season, the short -term outlook for Catapult looks appealing.
In the long-term, a higher percentage of Catapult's revenue is generated through subscription and recurring sales, which is also appealing. In addition, the company is in a global leader in athlete tracking solutions, giving Catapult great potential for growth in a relatively unpenetrated market.
