ASX tech share Catapult Group International Ltd (ASX: CAT) is in the green on Friday, up 0.49% to $1.02.
This caps off a solid six months of trading, during which time Catapult shares have risen by 38.5%.
This is why Julia Weng of Paradice Investment Management says Catapult is "hitting its stride" right now.
Are things about to change for this ASX tech share?
Catapult provides wearables and video analysis to almost 4,000 elite sports teams globally.
The technology provides movement metrics and on-field positioning to help teams improve their playing performance, strategy, and tactics.
The recent improvement in the Catapult share price follows a hard seven-year slog for investors.
Back in August 2016, Catapult was trading above $4.
So, it's still down by almost 75% over this time frame.
Why is the Catapult share price rising now?
Well, Weng says some fundamental shifts have occurred in the business.
Weng says (courtesy Australian Financial Review (AFR)):
Catapult Group has been around for a while but is now hitting its stride.
Chief executive Will Lopes is ex Amazon and has pivoted the business from hardware offerings to a software annuity, with 90 per cent of the revenue now subscription based.
The management team has made it a conscious priority to slow sales and marketing and R&D after a period of accelerated growth to achieve scale and adoption.
In turn, we have seen sequential improvement in cash flow over the last two halves.
The portfolio manager adds that the performance of the ASX tech share "has been disappointing".
However, that new cash flow funnelling through and some top-line growth should boost the stock.
She says:
Free cash flow should drive the share price from here along with top-line growth at 20 per cent.
Broker tips 17% growth in FY24
Broker Bell Potter has a speculative buy rating on Catapult shares and a 12-month price target of $1.20.
This implies a potential 17.6% upside from where the ASX tech share is today.
The broker commented:
Importantly the company has just turned EBITDA positive and said it will be free cash flow positive in FY24 (thus reducing or eliminating the need for an equity raise).
We expect continued strong revenue growth in the core Wearables business in FY24 and also expect growth in the previously lagging Video business to significantly improve this year.
This suggests or implies a return to double digit revenue growth in FY24 and with a relatively stable fixed cost base, a reasonable portion of the additional revenue is expected to fall through to earnings.
Catapult released its annual report three weeks ago.
