The ASX small-cap stock MotorCycle Holdings Ltd (ASX: MTO) has soared 100% in 11 months, as the chart below shows. After such a strong run, investors may be wondering whether the company is still a big opportunity.
For investors who haven't heard of this business before, it describes itself as the leading motorcycle dealership and accessories group in Australia. It sells new motorcycles, used motorcycles, accessories and parts, finance, insurance and mechanical protection plans and servicing.
After a difficult period, particularly in 2024, the business is reporting strong numbers.
FY25 half-year earnings recap
In the first six months of FY25, the business reported that sales increased 12% to $328 million, underlying operating profit (EBITDA) grew 20% to $26.2 million and net profit after tax (NPAT) rose 43% to $9.4 million.
The company noted that revenue increased across all departments, with new wholesale vehicles up 21% and both new and used retail vehicle sales up 11%. Impressively, e-commerce sales grew 44%.
It also reported a 36% improvement of net bank debt to $24.2 million.
MotorCycle Holdings' board decided on an interim dividend per share of 8 cents, an increase of 167% year over year.
The ASX small-cap stock reported that its new Cassons business systems have driven greater business efficiencies, which I think bodes well for further profit margin improvement.
Pleasing outlook for the ASX small-cap stock
One of the main reasons to be bullish on the business is that the company could continue growing profit. Management said it was "cautiously optimistic" for the second half of FY25. It said it was going to maintain an emphasis on cost management through a "structured expense reduction strategy". It also plans to consolidate business systems and boost digital capabilities to optimise efficiencies.
The company also believes more favourable agricultural conditions will lead to a positive impact on farm utility vehicle sales.
MotorCycle Holdings also said it plans to repay debt further while continuing to pay dividends to shareholders.
The business also wants to increase stock turnover to reduce inventory and provide a better return on capital. It's aiming to grow its used vehicle sales, increasing the ratio of used to new unit sales.
While it's doing all of this, the ASX small-cap stock wants to maintain its margins through further improvements in efficiencies. The business is also looking to grow e-commerce sales significantly.
It'll also evaluate potential acquisition opportunities as they appear.
Overall, I think this company has a very promising future as its profit rises again, particularly if interest rates reduce in Australia. This could lead to more discretionary spending by Australian households, which could be a big tailwind for earnings.
