Share and un-confused PD-86 stocks. This is Motley Fool Money. Can I fool? I'm Scott Phillips, the Motley Fool's chief investment officer here in Australia, and welcome back to another In-N-Out ever-popular series every week, because every week it's true.
Called Stock of the Week, where we bring you one by recommendation from the Motley Fool universe. We drag back the curtain, give you a little bit of a glimpse. We've got more than a glimpse. Can we talk to you about the company?
Why we like it, what the risks are, and bottom line, why we think you should buy the shares. So that's something for nothing. Well, I'm going to introduce you to a regular contributor to Stock of the Week, Andrew Lee at Getaway Mateo. Hey Scott, looking forward to giving another interesting company out to the world of YouTube.
As Live gets to our podcast feed as well. So if you listen to Motley Fool Money, this will drop into your podcast feed. If you're currently listening to Motley Fool Money, and you want to, go to YouTube. If you're on YouTube, make sure you check out the podcast feed.
Give your details of that later. Andrew, before we get into the company, well before we tell people it's catapults, the support analytics company. So let's get that out of the way. Before we get into it, my usual run through, which is boring and boilerplate.
But also really important. And we think well worth doing. By the way, other people don't do these sort of disclaimers or take this out of care. I'm not going to bag anyone.
I'm just going to say, if you're watching stuff on YouTube, listen to stuff, make sure you understand who's giving you the advice and who you should be listening to or not. Firstly, as I said before, we do general advice, only not personal advice. So when we say catapult to buy, and we will, know that we're saying it in general, you've got to decide whether it's right for you. That's the first one.
So you think we reserve the right to change our minds. Where long-term investors, Andrew, were saying catapult to buy, he thinks for the long-term. But it's something changes tomorrow, next week, next year, to meaningfully change our view of the business or its valuation. And remember that's meaningfully, that's important.
Then we'll tell you that as well. Lastly, if you're watching this later, we may have changed our minds since. We have long-term investors, we have changed our minds since this video and audio go to AS. So just bear that in mind, if you're listening or watching this some months down the track, we're doing this in early August 2021.
If you're doing this sometime down the track, just remember, please, this was our view at the time. Maybe even by now, we've updated that view. If you are looking back at this one, just keep that in mind. All right, mate, that's out of the way.
It's important. So we did it. Mate, catapult, not only is it AI medieval, a way to knock down walls, it's also apparently a sports analytics company. I know a little bit more about it, but you know I hate more about it.
So give that to our viewers and listeners, the good oil. Mate, what exactly is catapult? What exactly are these as a sports analytics? So catapult has its roots in the Sydney, two thousand Olympic games where the AIS got together with some other government industry research bodies and came up with a form of technology that they thought would help the Australian Olympic team reach their potential and have a very successful games in Sydney, which they did.
So that was where it started. Now, what they've kind of went on to is to become this leading player in sports analytics. Now, what is sports analytics? Essentially, you have a sporting team, you have a bunch of people that run around kickable, chasable, all of that type of stuff.
But in order to get them to do that ball chasing or ball kicking most effectively, you want to kind of make sure that you have a good handle on what their activity is like, how much are they running? How fast are they running, sprinting, changing direction? All of this stuff. And what catapult is essentially done is come up with a very good way to capture all of those stats that are increasingly important in a whole range of sports.
So, and they can give sports specific stuff as well. So, for example, in American football, they have a whole bunch of metrics that they can capture what the quarterback does along with things just such as total distance run, how much time is spent, sprinting, jogging, changing directions, explosivity, all this other stuff that professional sports teams and sports stats nerds probably know and pay attention to. But the vast majority of people, when we're watching a sport on TV, are just going to go, wow, that person can run really fast. But what catapult is doing is having a really quantitative way of looking at that.
So that teams, coaches and everyone can make the best decisions about how that player should be managed. Perhaps they need a rest. Are they at risk of injury? All of these important things.
Which when you're paying some of these professional athletes, millions of dollars a year, it's a worthwhile investment to try and keep them on the park as much as possible. I like that. It just occurred to me that we're doing this going to be alive on a Wednesday afternoon. And it occurs to me that the day before this goes live, Tuesday afternoon, you have just bought our very first Motleyful Favorite Investment Book episode of our brand new series.
You're doing Moneyball. And there's a very, very nice symmetry between the sports analytics, the data nerds stuff you just talked about in Moneyball and where Catapults got to. So there you go, viewers and listeners. If you have already checked it out, make sure you check out yesterday's YouTube video on Moneyball.
I just Google Motleyful Australia Moneyball. I'm sure it'll come up. It's a very nice time to do it together. I have to ask, let's just complete fluke.
Complete fluke. But I've also had this coming in off. For all the talk about Catapults, baseball is one of the weakest sports in Catapults, you know, Arsenal of professional sporting team clients. So the book does a great way of acknowledging the importance of data in sport, but Catapults does something very different to what Billy Bean and the likes were doing in Moneyball.
Very good. All right. So two sides of the same coin. Let's move a little bit forward.
So you talked about Catapults really nicely. A brand new innovative area of sports management, player management, talent management, as you say, hopefully getting maximum value for the fans and also for the clubs owners or maybe just the club itself. It's not for profit or not anybody. We're just trying to maximize that value of guess from it's talent on the roster.
Let's move out to why we like the company. Now to some degree, we can say, well, we like it because it does those things. But doing stuff is not enough. I've used the example way more times than I should, but you can love the fact that there was plenty more airline flights over the last 50 years, but you still lost a fortune.
So just because you like something, you can explain it isn't enough. You can explain Catapults beautifully, but we also like it as an investment. So I'll get a little turned to that now and say, Andrew, why do we like Catapults as an investment specifically? OK, well, to start off, it has a really strong base.
So it dominates the Australian market. So you could think of any professional sporting team in Australia, whether it's NRL, AFL, A-League, the Australian Super Rugby teams. They're all part of Catapults client list. Now, it's also increasingly, in fact, it's bigger overseas, just by nature of how much opportunity there is out there as well with North America in particular, a big market.
So it already has a very strong footing in this industry. Now, and that's not something you can say for a lot of Australian businesses, where you can actually say, they already have a very strong footing, not just locally, but overseas as well in the bigger international markets. And they are much bigger than the Australian market is. So that's a start.
Secondly, it is an increasingly growing trend. Now, the life sport has been a place where player wages has been increasing pretty significantly, along with the sporting rights paid for television and things like that. And you can see just in some of the really, the tier one players, how much they're bringing in a year. Now, what that means is it is important for these players to stay on the park.
And in a sport like basketball, for instance, where your key player can be statistically calculated to be worth a significant number of wins across the season, that's a big deal. And you want that player on the park or on the court or whatever sport you choose. Secondly, it's a diversified base. So it's got about 3,200 teams in its client list.
Catapult puts the total market around 10,000 teams. So it's around 30% of market share at the moment. But that's 3,000 teams, probably teams that you love, probably teams that you follow, and teams that you're definitely well aware of across at least 20 different sports. So it's a diversified business base in an emerging industry that is increasingly important because players can only get you so much.
You also want to make sure you're signing the right players. You're using them correctly. All of that type of stuff is important in the really big business that is sport. It's all about the edge, right?
It's all about finding that difference between you and the other guy, and sports analytics is increasingly part of that. Or maybe even today, with so many teams already doing it, you've just got to be there just to keep up, let alone try and get ahead, right? Yeah, yeah, definitely. Just to stay on the level playing field now, every team is doing this.
Like I said, 3,200 elite sporting teams use Catapult. Others use the competitors. But that's a lot of teams. And I could go down a list.
And if, say, the Boston Celtics in basketball, or the Milwaukee Bucks who just won the NBA championship are using it, then if you're the Los Angeles Lakers or something like that, you want to make sure that you're not falling behind. Also, when you're trying to sign up new players as well, you want to actually make sure you're making the most informed decision possible going back to the Moneyball discussion. That's what they were doing. So that's kind of the big picture thing.
Now, what is going to drive them forward? Well, like I said, they can continue signing up new teams. Now, they have around 3,200 or so teams signed up to it. They, the management has the market around 10,000.
So there's still a lot of teams there. And I don't think a lot of people in Australia really appreciate the North American opportunity. We're used to having the major leagues, your NRLs, your AFLs, and things like that. But in America, it is not just your major league baseball NBAs.
They have college leagues, which are big business as well. Billions of dollars is being spent across these leagues. And your college team in America is just as serious about all of this stuff as your major league team. And if anybody has rival to it, if you've seen any college football, I want a lot of it.
But when I've been in America, I put the TV on the weekend, the college football form has begun the NFL. I should say that the range is the number of different teams and different leagues, even in those sports, across countries just phenomenal. Yeah, some college teams have stadiums that have a higher capacity than the NFL teams. That's just how it is.
Also, what's driving it forward on top of just getting these new teams signed up and increasing its client list is increasing the amount of products that it offers. Now, to begin with, Catapult only had one or two products. They've since mainly through acquisition, which I'll get to later, grow that list. Now, what it can offer is basically a whole range of different products.
And increasingly, its clients are choosing to have more than one solution, which is another growth option because there's questions as to how far it may be able to grow in getting new teams. But then you can also sell how many solutions that you have with your existing client base. So the Catapult spread and mutter is its GPS trackers. It also has video management, video coaching analysis equipment, player management, welfare software, and things like this.
So these are all extra things that they can use to not only grow as a company, but to also entrench itself inside that team so that that team is less likely to go choose a competitor, what's in software and a lot of people in investing like to call customer retention. And then finally, just in its growth, and I'll summarize this because I know there's been a lot here, Catapult is increasingly going down an acquisition route and acquiring more companies to increase the amount of products, increase the sports it's exposed to. It just completed one that brought motorsport into its into its fold, which is an area of a sport that Catapult hasn't usually been focused with. But I expect that consolidation to continue.
There's a lot of little companies in these industries all doing their own little thing, and it does make a lot of sense for a company to be able to offer a lot of these solutions to its teams rather than having teams needing to deal with three or four or five different companies for little niches of the sports analytics market. So just to summarize, it can increase through teams, and I expect to see it do so. It can sell more of its products to its existing client list. It's an industry that is growing and it is linked to sport, which itself is growing as well.
It's an important industry, player management, and all these analytical tools are increasingly important when it comes to coaching, managing players, acquiring new players, all of this type of stuff. And then, yeah, this industry consolidation, which is allowing Catapult to pick up smaller players and build that into its company to become, to be able to offer its customers even more. Motley Fool Money. Financial advice for real people, not trust FundyBees.
Sign up for the newsletter at fool.com.au forward slash triple M. I'm going to turn to the risks because as responsible financial advisors, that's always important. We always give a recommendation with risks to make sure our members, normally, or our viewers in this case, I listen to this case, know what they're getting into if they choose to buy a she has a catapult. Let me let off with a question, mate, then you get into the risk you've prepared.
I'm sorry if I'm throwing you here. You sort of let the growth about the market size. I got to figure out some point, Catapult hit some sort of ceiling, and yes, keeps growing incrementally by new service, new team, new service, new team. But at some point, there's some sort of status, some sort of status quo.
Is there enough room left for Catapult to justify the current price given the value of your amount of growth, or the limitations on that growth? I think so. And I don't know if there's precise multiple that Catapult sign at the moment, but last time I looked, it wasn't that expensive. But looking for looking, you're right, there is a limit.
There's only so many elite sporting teams that exist around the world, especially some of those are going to also be markets that probably don't have the investment required to justify spending on the little GPS device. So that is a risk. And I've said that it practically already owns most of the Australian market. So I would expect not so much growth to be coming through that business.
The internationally, it's a lot bigger. Again, there are some sports, namely soccer that it has a really big position in. It's also got, I think it also works with every team in the NFL, works with most NBA teams. So there are these sports where Catapult, you can almost say that Catapult owns these markets.
So that's a great thing in one way. But yeah, like you point out, that does also mean that the places that it has to grow, is less. Thankfully, there are increasingly new sports that are coming into the fold, where recording this in August 2021, the Olympics just finished. I had great fun playing spot the Catapult device during some of those games.
I saw it in the hockey, for instance, which isn't one of the Catapult's main sports, but you can easily see why there's not a lot of difference between hockey as a sport and soccer, just the one user sticks and the other one users feet. You know, the hockey fans and soccer fans right now are yelling things at you through the podcast of us, through the YouTube machine, which says not much of it in the sports. But I'll leave that alone. Let's move on to keep you out of the flame reach of some die-hard fans of those sports.
Yeah, well, I used to play soccer. I'm okay with that. But yeah, I just directed you, mate. Let me hear the recipe of your prepared.
OK, well, that was actually what you discussed was actually one of the risks is how much further, how much further, and it's probably one of the major risks to discuss. So how much further can Catapult grow if it already has a significant foothold in many of its main sports? Now, it has shown that it can go elsewhere. It can get other sports.
There's increasingly more lacrosse team signing up. I saw, I mentioned hockey teams. You know, baseball is one of its major sports, but doesn't have a huge kind of position in there yet. That could grow.
It's also there's also some optionality there. One thing that a lot of people might not realize and we've been talking about sports analytics. Catapult has also done a deal with the US Navy seals. That's what we were.
As part of their kind of training training and health management process. That's what we were actually. It makes a whole lot of it. So there is this optionality that could help it grow in the future.
So it is a risk that Catapult has captured a large amount of the market. And that's great. I think it can go further. And I do expect it to continue signing up new teams.
It's a big wide world. There's a lot of sports out there. And there's sports where a lot still haven't quite hit the data revolution that say the US has been on for a number of years now. So that there's still that tailwind.
I think it is a risk, but I'm not getting overly concerned about it at this stage. The next thing is competition. Always a risk with every company. Competition is also an issue with Catapult in its industry.
I think before the last FIFA World Cup, Catapult lost a number of high profile clients, including the Brazilian national team to arrival from Ireland called Stat Sport. They are also very heavily involved in the world of soccer and have a lot of high profile clients themselves. Just as Catapult does, they do something very similar as well. So that is something that will continue needing to play out.
I think it makes sense for there to be a competitor. I don't expect there to be lots of different individual players in this market. Once these teams know what solution works, I think I expect them to for the most part stay there. So that's the other factor.
The final one I'll get to. I've talked about how Catapult has had a lot of acquisitions over the years. I think that will continue. That has meant that Catapult has had to raise a lot of capital.
So there's probably some investors out there complaining about shared dilution. We're also in a period where I would say it's management team is still relatively new. So we're still needing to kind of see the path they take it on previous before this current CEO. Catapult went down a path of trying to do what they call the pros humour market, which is basically consumers who want to have the same things that elite sports people do.
We can worry. It made complete sense as a business opportunity. We haven't quite seen the results there. We don't know exactly yet.
I think it's still early enough days to see where this CEO decides to take Catapult as it is now. And that also means how that new management team integrates all these acquisitions that it's done. Because acquisitions are great. They're a great way of buying growth.
But sometimes you can get an ask the case of indigestion when you try to swallow that and it doesn't quite always pan out well. So that's something that we'll also need to watch. Beautiful mate, you don't know. I'm summarising both the pros and the risks that the cons.
I'm going to give our usual challenge. Now the 60 seconds ish, elevate a pitch. Hit me with the bottom line. Why should at least as we record now, why should our viewers and listeners be considering buying shares in Catapult?
So Catapult have done what a lot of successful Aussie software companies have done. Find a nation and become a really big player and own that nation. And Catapult has done that they have the relationships in place with the top tier elite sporting teams in the world. Now on top of that, they are taking advantage of an industry that is growing and increasingly important in its field.
And due to its position as one of the leaders, I believe they can continue to grow in that field even further. I think they can inquire and become bigger, improving retention as well. And all of that, because it's a capital light software business for the most part, it does do some hardware, increased profits. And what I think is a reasonable valuation for it right now.
I think Catapult is a great opportunity. Thank you Andrew. Sending jobs always make you a simplified, the foolish approach to analysis and your borders, a recommendation by recommendation, for at least one of our Motley full services. Thank you for your time doing that.
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Thank you for your listeners, for giving us your time and hopefully you've enjoyed this insight into catapult the code. By the way, it's C-A-T on the ASX. It is currently Motley full by recommendation. And until next time, for Andrew and I, full on.