Why Catapult Group International Ltd is one stock to watch

One tiny Aussie company is taking on the world in sports analytics. Can it win?

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published January 21, 2015 2:37 pm AEDT

You may have noticed AFL, rugby union and rugby league players wearing what look like bras, with a special pocket in the middle of their back.

No, it's not a new fashion statement, but a recent trend in sports analytics, with players wearing hardware devices to monitor and track their performance on the field.

Catapult Group International Ltd (ASX: CAT) is the company providing those devices as well as the sophisticated analytical software, which can be used to analyse the data gathered by the device.

A recent listing on the ASX, Catapult has a huge range of clients, including all AFL teams, all NRL teams every Super Rugby team, Australia's cricketers, Wallabies and Socceroos, not to mention the Australian Institute of Sport – and that's just in Australia.

Overseas, Catapult products are used by 12 US National Football League (NFL) teams, 10 US National Basketball Association (NBA) teams, 10 British soccer teams and more than 30 other premier teams competing in European competitions. In fact, 70% of revenues come from offshore. The funds raised in the IPO will be used to continue the company's expansion into North America and Europe in particular.

Two of the company's founders still work full time in the business, and hold a significant amount of shares after the IPO. Growth is expected to come from increased market penetration, continued subscription sales, recurring revenue, product upgrades and new analytical packages, and expansion into new markets such as military/defence and consumer devices.

Could this company, with its technology purchased from the Commonwealth Co-operative Research Centre (CRC) and its numerous patents be another CSL Limited (ASX: CSL)? By the way, did you know that CSL started out as Commonwealth Serum Laboratories, before being privatised in 1994 – hence the CSL.

Potentially it could be yes. But at this stage it's still a risky proposition and the company has yet to produce a profit. It's unlikely to pay a dividend either in its early days – with the company noting in its prospectus that it believes cash would be better served by being reinvested back into the company. If the company can generate high returns on equity – then logically, it should reinvest the cash back into the business.

Add this one to your watchlist.

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