Despite remaining relatively unnoticed due to its small size and international operations, Singapore-based IoT and SaaS player Karooooo (KARO) is a formidable player in the global market. The company is also seizing opportunities in South Africa and Southeast Asia for substantial growth. Through its Cartrack platform, Karooooo has transformed on-the-ground operations in various sectors, providing real-time data analytics and insightful business intelligence. Recently, the company beat earnings expectations while reporting a revenue of $57.80 million.
The company is poised to expand its influence in the Southeast Asian market, with positive momentum, high profitability, and potential for robust growth. It is an attractive opportunity for investors interested in emerging markets exposure with tremendous upside potential.
Karooooo Rapidly Growing Its Global Footprint
Karooooo is a player in the Internet of Things (IoT) and Software as a Service (SaaS) sector. It is known for its autonomous operation across diverse verticals such as fleet management, field service, and risk mitigation. Karooooo’s crown jewel is its wholly-owned SaaS platform, Cartrack, which accounts for over 80% of its revenue.
Cartrack provides comprehensive services to a wide range of enterprise customers seeking to digitalize their on-the-ground operations. In addition to essential real-time data analytics, Cartrack rainbow of solutions ranges from system integrations to ESG compliance and reporting.
The company has a notable global footprint, with over 2.1 million active subscribers from 121,000 businesses across 23 countries. Interestingly, a significant portion (around 80%) of Karooooo’s revenue is sourced from South Africa. However, the Southeast Asian market is anticipated to be the next growth frontier for the firm, considering the region has already recorded the company’s fastest growth rate of over 24% in FY2024.
Karooooo’s Recent Financial Results & Outlook
The company recently reported results for Q1 FY2025. Revenue of $57.8 million slightly missed analysts’ estimates of $58.92 million yet marked a 15% increase over the previous quarter. Subscription revenues contributed 98% of the total, as Karooooo Logistics saw a significant revenue boost of 63%, demonstrating the firm’s successful focus on delivery-as-a-service for large enterprise customers. Operating profit rose 34%, and earnings per share surged 41%. The company reported earnings per share of $0.40, beating analysts’ estimates of $0.36.
The company also announced a dividend of $1.08 per share, equating to a dividend yield of 2.85%
Following first-quarter results, KARO’s management has offered guidance for FY2025, projecting Cartrack’s subscribers between 2.2 and 2.4 million, an Operating Profit Margin between 27% and 31%, and earnings per share between $1.55 and $1.75.
Is KARO Stock a Buy?
The stock has been on an upward trend, climbing roughly 62% year-to-date. It trades at the high end of its 52-week price range of $18.59 – $40.87, showing ongoing positive price momentum, trading above its 20-day (37.17) and 50-day (35.20) moving averages. Despite the run-up in price, shares trade at a relative value with a P/S ratio of 5.2x, which is favorable to the Software Application industry’s P/S average of 6.8x.
Analysts following the company have been bullish on KARO stock. Karooooo is rated a Moderate Buy based on two analysts’ recent recommendations and price targets. The average price for KARO stock target is $40.00, representing a potential 4.96% gain from current levels.
KARO in Conclusion
KARO presents a compelling investment prospect with significant momentum in emerging markets. With its upward trajectory and discount to industry peers, the stock is a compelling option for investors seeking exposure to the expanding SaaS sector in emerging markets.
