Karooooo (KARO) AI Stock Analysis

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Karooooo

(NASDAQ:KARO)

75Outperform

Karooooo exhibits strong financial performance and positive earnings call sentiment, supported by significant revenue growth and strategic expansion, particularly in Southeast Asia. While the technical indicators suggest potential downward pressure, the company's robust cash flow and moderate valuation provide a solid foundation for future growth. Minor challenges from currency fluctuations and promotional impacts warrant attention.

Positive Factors

Digitization and Operational Efficiency

The company's connected operations platform is driving further digitization of physical assets to increase visibility and operational efficiency.

Market Position and Growth Potential

The company is well positioned to continue capitalizing on the early-stage momentum of physical operations' digitization.

Subscriber Growth

Solid traction is seen in subscribers, and Cartrack expects subscribers to grow by 19% at the mid-point in FY25F.

Negative Factors

Customer Risks

The main risks for Karooooo are competition, emerging markets, foreign exchange, customer churn, and stolen vehicle recovery.

Market Risks

The main risks for KARO are competition, emerging markets, foreign exchange, and customer retention.

Karooooo (KARO) vs. S&P 500 (SPY)

Market Cap

$1.24B

Dividend Yield2.7%

Average Volume (3M)30.43K

Price to Earnings (P/E)25.8

Beta (1Y)1.10

Revenue Growth10.07%

EPS Growth31.38%

CountryUS

Employees4,387

SectorTechnology

Sector Strength49

IndustrySoftware - Application

Share Statistics

EPS (TTM)1.55

Shares Outstanding30,893,300

10 Day Avg. Volume27,223

30 Day Avg. Volume30,431

Financial Highlights & Ratios

PEG Ratio0.82

Price to Book (P/B)N/A

Price to Sales (P/S)5.78

Price to Cash Flow (P/CF)N/A

P/FCF Ratio0.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$48.67

Price Target Upside21.58% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering4

Karooooo Business Overview & Revenue Model

Company DescriptionKarooooo (KARO) is a global telematics company that provides fleet management solutions to businesses across various sectors. The company operates primarily through its Cartrack brand, offering a comprehensive platform for vehicle tracking, fleet management, and insurance telematics. Karooooo leverages advanced data analytics and machine learning technologies to enhance the efficiency, safety, and productivity of its clients' operations, serving industries such as logistics, transportation, and insurance.

How the Company Makes MoneyKarooooo makes money by offering subscription-based fleet management services through its Cartrack platform. The company's primary revenue stream comes from recurring subscription fees charged to clients for access to its telematics and data analytics services. These services include real-time vehicle tracking, driver behavior analysis, fuel monitoring, and vehicle recovery solutions. Karooooo also generates revenue from hardware sales, such as GPS tracking devices, which are integrated into clients' vehicles. Significant partnerships with insurance companies and automotive manufacturers further contribute to its earnings by expanding its market reach and creating additional revenue opportunities through customized solutions.

Karooooo Financial Statement Overview

Summary

Karooooo demonstrates a strong financial standing with consistent revenue and profit growth, solid margins, and prudent balance sheet management. The company's ability to generate ample cash flow supports its sustainable growth trajectory and investment potential. While the financials reveal strengths in profitability and cash efficiency, continuous monitoring of leverage and market conditions will be crucial.

Income Statement

Very Positive

Karooooo exhibits strong financial performance with a steady increase in revenue and profitability. The gross profit margin stands at 68.8% for TTM, reflecting efficient cost management. The net profit margin is robust at 19.9%, indicating healthy profitability. Revenue growth is impressive, with a 21.6% increase from the previous year, driven by demand for software solutions. The EBIT margin is 27.6% and the EBITDA margin is 32.5%, showcasing solid operational efficiency.

Balance Sheet

Positive

The balance sheet shows a strong equity position with an equity ratio of 61.1%, indicating stability. The debt-to-equity ratio is low at 0.2, suggesting conservative leverage and financial prudence. ROE is healthy at 30.2%, implying effective use of equity to generate profits. Overall, the balance sheet reflects a stable financial position with low risk from debt.

Cash Flow

Very Positive

Operating cash flow is strong, significantly exceeding net income with an operating cash flow to net income ratio of 1.75, indicating efficient cash generation. Free cash flow has grown substantially by 1346.8% from the previous period, reflecting improved cash management and reinvestment capability. The company's cash flow position underscores its ability to fund operations and growth without reliance on external financing.

TTM	Mar 2024	Mar 2023	Mar 2022	Mar 2021	Mar 2020
Breakdown
Income Statement		Total Revenue
4.44B	4.21B	3.51B	2.75B	2.29B	1.94B
	Gross Profit
3.05B	2.69B	2.27B	1.82B	1.62B	1.37B
	EBIT
1.22B	1.04B	881.91M	197.56M	306.56M	630.92M
	EBITDA
1.44B	1.81B	1.51B	694.92M	1.15B	960.54M
	Net Income Common Stockholders
881.09M	738.19M	597.15M	449.95M	497.42M	443.53M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
921.74M	459.53M	965.79M	731.75M	987.36M	146.59M
	Total Assets
4.79B	4.31B	3.75B	3.09B	2.99B	1.85B
	Total Debt
577.75M	266.81M	181.32M	217.28M	1.03B	130.33M
	Net Debt
-343.98M	-192.72M	-784.47M	-514.46M	46.20M	-16.26M
	Total Liabilities
1.82B	1.30B	1.06B	915.42M	1.71B	620.12M
	Stockholders Equity
2.92B	2.96B	2.66B	2.15B	917.17M	878.22M
Cash Flow		Free Cash Flow
397.27M	27.47M	500.35M	335.26M	407.76M	478.26M
	Operating Cash Flow
1.54B	955.04M	1.13B	931.71M	931.05M	901.22M
	Investing Cash Flow
-984.49M	-932.19M	-615.81M	-658.22M	-524.67M	-427.44M
	Financing Cash Flow
-453.49M	-592.95M	-426.43M	334.97M	390.58M	-368.23M

Karooooo Technical Analysis

Technical Analysis Sentiment

Negative

Last Price40.03

Price Trends

50DMA

43.53

Negative

100DMA

44.49

Negative

200DMA

40.75

Negative

Market Momentum

MACD

-1.16

Positive

RSI

41.76

Neutral

STOCH

56.00

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For KARO, the sentiment is Negative. The current price of 40.03 is below the 20-day moving average (MA) of 41.19, below the 50-day MA of 43.53, and below the 200-day MA of 40.75, indicating a bearish trend. The MACD of -1.16 indicates Positive momentum. The RSI at 41.76 is Neutral, neither overbought nor oversold. The STOCH value of 56.00 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for KARO.

Karooooo Risk Analysis

Karooooo disclosed 68 risk factors in its most recent earnings report. Karooooo reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Karooooo Peers Comparison

Overall Rating

UnderperformOutperform

Sector (57)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ITRN	82 Outperform	$660.77M	12.18	29.83%	5.08%	5.09%	12.45%
KARO	75 Outperform	$1.24B	25.75	31.45%	2.70%	10.07%	31.38%
NABL	68 Neutral	$1.26B	40.48	4.21%	―	10.49%	30.42%
PUBM	67 Neutral	$411.51M	36.55	4.36%	―	9.08%	43.58%
SPT	64 Neutral	$1.15B	―	-39.88%	―	21.66%	8.66%
MLNK	61 Neutral	$1.27B	―	-6.36%	―	4.18%	27.11%
Sector *	57 Neutral	$19.95B	9.66	-12.09%	2.76%	5.40%	-24.89%

* Technology Sector Average

Performance Comparison

KARO

Karooooo

39.28

13.08

49.92%

ITRN

Ituran Location And Control

32.86

8.13

32.88%

SPT

Sprout Social

19.38

-35.73

-64.83%

PUBM

PubMatic

8.38

-13.29

-61.33%

NABL

N-able

6.72

-5.56

-45.28%

MLNK

MeridianLink

16.60

-0.22

-1.31%

Karooooo Earnings Call Summary

Earnings Call Date: Jan 14, 2025 | % Change Since: -15.71% | Next Earnings Date: May 1, 2025

Earnings Call Sentiment Positive

The earnings call reflected a strong financial performance with significant revenue growth, subscriber increases, and strategic expansion particularly in Southeast Asia. Despite minor challenges from currency fluctuations and seasonal promotions, the overall outlook remains positive with ample growth opportunities.

Highlights

Strong Financial Performance

Karooooo's total revenue for Q3 was ZAR 1,159 million, an increase of 15% year-on-year. Subscription revenue increased 14% year-on-year to ZAR 1,032 million, with an adjusted earnings per share increase of 21% to ZAR 7.67.

Cartrack's Growth

Cartrack subscription revenue was approximately ZAR 3 billion year-to-date, an increase of 15% year-on-year. Cartrack's subscriber base increased 17% year-on-year, reaching over 2.2 million subscribers.

Expansion in Southeast Asia

Karooooo is ramping up investment in sales and marketing across Southeast Asia, which represents a significant growth opportunity. Subscriber growth in Asia and the Middle East increased 20% year-on-year in Q3.

Karooooo Logistics Revenue Growth

Karooooo Logistics Delivery as a Service revenue was ZAR 310 million year-to-date, an increase of 38% year-on-year.

Strong Cash Position

Karooooo ended the quarter with cash and cash equivalents of ZAR 856 million, maintaining an unleveraged balance sheet.

Lowlights

Impact of Currency Fluctuations

The stronger rand negatively impacted subscription revenue from non-South African entities, such as those in Europe and Southeast Asia.

Reduced Growth from Black Friday Promotions

Karooooo Logistics' revenue growth in Q3 was negatively impacted by customers' strategic focus on in-store Black Friday promotions, resulting in a lower-than-expected growth of 20% year-on-year.

Company Guidance

In the Q3 2025 earnings call for Karooooo, the company reported robust financial performance driven by its two main operating units, Cartrack and Karooooo Logistics. Cartrack's subscription revenue reached approximately ZAR 3 billion for the year-to-date, marking a 15% increase year-on-year, and the unit maintained a strong operating profit margin of 30%. Karooooo Logistics also showcased significant growth with a 38% year-on-year increase in Delivery as a Service revenue, totaling ZAR 310 million. Overall, the company achieved total revenue of ZAR 1,159 million for the quarter, a 15% increase year-on-year, and an adjusted earnings per share of ZAR 7.67, up by 21% from the previous year. Cartrack's subscriber base grew by 17% to over 2.2 million, underscoring the company's continued expansion in various regions, particularly in Southeast Asia. With a healthy LTV to CAC ratio of greater than 9 and a commercial customer retention rate of 95%, Karooooo reaffirmed its FY '25 financial outlook, emphasizing its strong unit economics and disciplined growth strategy.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.