Catapult Group International Ltd (ASX:CAT): Intrinsic Value 25% Below Share Price

Catapult Group International Ltd (ASX:CAT) has been making waves in the sports science and analytics industry, providing elite sporting teams and athletes with cutting-edge technologies to optimize performance, prevent injuries, and enhance return to play. However, the company's share price has not kept pace with its impressive growth prospects and earnings potential. In this article, we will explore how Catapult's intrinsic value is potentially 25% below its current share price.



Catapult's Intrinsic Value: A Deep Dive
Catapult Group International Ltd's estimated fair value is AU$3.04 based on a 2 Stage Free Cash Flow to Equity (FCFE) analysis. This valuation method estimates the company's future cash flows and discounts them to their present value, taking into account the time value of money and the risk associated with these cash flows. The 2 Stage FCFE analysis considers Catapult's growth prospects over the next ten years and its terminal value, which accounts for all future cash flows after this period.



Catapult's Share Price: A Closer Look
Catapult's current share price is AU$2.74, which suggests that the company is potentially trading at a 10.0% discount to its estimated intrinsic value. This discrepancy can be attributed to several factors, including market sentiment, lack of major broker coverage, and Catapult's higher beta, which indicates that its price volatility is higher than the market average.

Catapult's Growth Prospects and Earnings Potential
Catapult's growth prospects and earnings potential play a significant role in its intrinsic value. The company is forecast to grow earnings and revenue by 78.6% and 14.6% per annum, respectively, while EPS is expected to grow by 93.7% per annum. This high growth rate is driven by Catapult's innovative sports data and analytics solutions, which are in high demand by sporting teams and athletes worldwide.



Catapult's earnings growth potential is further supported by its strong financial performance. In the last 12 months, the company had revenue of AUD 155.90 million and a loss per share of -0.09. Despite the loss, Catapult's revenue growth rate of 27.4% indicates that the company is on track to achieve profitability in the near future.

Interest Rates and Market Volatility: Their Role in Catapult's Valuation
Interest rates and market volatility play a significant role in Catapult's valuation, as they influence the cost of capital and the risk premium investors demand. Higher interest rates increase the cost of capital, making future cash flows less valuable in today's dollars. This can lead to a lower valuation for Catapult. Conversely, lower interest rates decrease the cost of capital, making future cash flows more valuable, which can result in a higher valuation. Market volatility influences the risk premium investors demand for holding Catapult's shares. Higher market volatility increases the risk premium, making Catapult's shares less attractive and potentially leading to a lower valuation.

Conclusion
Catapult Group International Ltd's estimated intrinsic value of AU$3.04 suggests that the company is potentially undervalued by 25% based on its current share price of AU$2.74. This discrepancy can be attributed to several factors, including market sentiment, lack of major broker coverage, and Catapult's higher beta. Catapult's strong growth prospects and earnings potential further support its intrinsic value. However, interest rates and market volatility play a significant role in Catapult's valuation, and investors should consider these factors when evaluating the company's share price. As Catapult continues to innovate and expand its sports data and analytics solutions, investors may want to consider adding the company to their portfolios at its current discounted share price.