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Karooooo (KARO)
NASDAQ:KARO
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Karooooo
(NASDAQ:KARO)
Rating:77Outperform
Price Target:
$55.00
▲(15.11%Upside)
Positive Factors
Financial Performance
Operating income of R352 million exceeded consensus by R17 million, reflecting a robust 28% margin, showcasing strong financial performance.
Subscriber Growth
Karooooo's net subscriber additions reached a record 84,013, increasing 17% year-over-year, indicating strong customer acquisition.
Valuation
Karooooo shares are attractively priced at 10x EBITDA, offering a discount compared to supply chain peers valued at 25x, suggesting potential for stock revaluation.
Negative Factors
Growth Expectations
ARR per subscriber is projected to grow 4.5% year-over-year in FY26, lower than prior management commentary of 6% growth, indicating tempered growth expectations.
Market Risks
Major risks for Karooooo include competition, emerging markets volatility, foreign exchange fluctuations, and customer churn, posing potential challenges to growth.
Valuation Concerns
Concerns regarding the national power grid have resulted in a 25% discount in Karooooo's target multiple compared to SaaS peers, reflecting investor caution.
Karooooo (KARO) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$1.50B
Dividend Yield0.06%
Average Volume (3M)101.13K
Price to Earnings (P/E)28.4
Beta (1Y)1.31
Revenue Growth14.21%
EPS Growth23.74%
CountryUS
Employees4,387
SectorTechnology
Sector Strength86
IndustrySoftware - Application
Share Statistics
EPS (TTM)0.49
Shares Outstanding30,893,300
10 Day Avg. Volume53,658
30 Day Avg. Volume101,126
Financial Highlights & Ratios
PEG Ratio-1.25
Price to Book (P/B)8.62
Price to Sales (P/S)0.00
P/FCF Ratio16.56
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$55.75Price Target Upside16.68% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering5
Karooooo Business Overview & Revenue Model
Company DescriptionKarooooo Ltd. provides mobility software-as-a-service (SaaS) platform for connected vehicles in South Africa, rest of Africa, Europe, the Asia-Pacific, the Middle East, and the United States. The company offers Fleet Telematics, a fleet management SaaS platform that provides real-time insights; LiveVision, which offers pro-active risk management and fleet visibility; MiFleet advanced fleet administration and business intelligence that provides cost management and administration capability services; and Karooooo Logistics, a software application for management of last mile delivery and general operational logistics. It also provides Cartrack Field Service, a software application for management of field and on site workers; Business Intelligence for high-level view of fleet statistics; asset tracking for tracking and tracing moveable assets; asset recovery services that assists vehicle owners and insurance companies with the recovery of vehicles and other assets; and insurance telematics that allows insurers to tailor premiums for commercial and consumer customers using analytics; Protector, a safety package for consumer vehicles; and Car Watch, a mobile application that lets users track and watch their vehicles. In addition, the company offers specialist mobility solutions that include Bike Track, a GPS-based solution for commercial motorbike fleets; Credit Management that predicts payment cycles and facilitate active credit management for asset-based vehicle finance; electronic monitoring services application that allows law enforcement agencies to monitor persons of interest; and mobility and monitoring solutions, such as Carzuka, cartrack insurance agency, and on-demand rideshare taxi application, as well as smart IoT products. It provides its solutions through direct sales force to consumers and sole proprietors, small and medium-sized businesses, large enterprises, and other connected devices. Karooooo Ltd. was founded in 2001 and is headquartered in Singapore.
How the Company Makes MoneyKarooooo generates revenue primarily through subscription fees for its telematics and fleet management services. Customers, including businesses with vehicle fleets and individual vehicle owners, pay recurring fees to access the platform's capabilities, which include real-time tracking, driver behavior analysis, and vehicle diagnostics. The company also offers value-added services such as stolen vehicle recovery, driver communication tools, and analytics reporting, which enhance its revenue streams. Karooooo's revenue model is supported by its scalable software-as-a-service (SaaS) platform, allowing it to expand its customer base globally. Additionally, partnerships with vehicle manufacturers and insurance companies can provide further revenue opportunities by integrating Karooooo's solutions into new markets and enhancing the overall value proposition for end-users.
Karooooo Earnings Call Summary
Earnings Call Date:Jul 22, 2025
(Q1-2026)
| % Change Since: -5.50%|
Next Earnings Date:Oct 09, 2025
Earnings Call Sentiment Positive
The earnings call highlighted significant growth in subscription revenue, high customer retention, and expansion in key markets like Southeast Asia and Europe. However, challenges remain in achieving ARPU growth targets and managing operational costs.Q1-2026 Updates
Positive Updates
Strong Subscription Revenue Growth
Cartrack's subscription revenue increased by 19% in ZAR and 24% in USD. Subscription revenue accounts for 98% of Cartrack's total revenue.
High Customer Retention
Cartrack's commercial customer ARR retention rate remains at 95%, with a subscription gross margin of 74% and an LTV to CAC ratio above 9x.
Southeast Asia and European Expansion
Southeast Asia and the Middle East subscription revenue growth accelerated to 30%, and European subscription revenue growth accelerated to 22%.
Record Net Subscriber Additions
Cartrack experienced record Q1 net subscriber additions of 84,000, an increase of 11%.
Profitable Growth and Cash Flow
Operating profit increased by 17% to ZAR 352 million, and free cash flow was ZAR 338 million.
Rule of 60 Achievement
Cartrack achieved a Rule of 60, combining a 19% subscription revenue growth and a 46% adjusted EBITDA margin.
Negative Updates
Challenges in Achieving ARPU Growth Target
ARPU in South Africa increased by 2% in ZAR, but the target of 10% growth for FY '26 may take longer than expected.
Operational Cost Concerns
Despite growth, there are increased investments in sales capacity and infrastructure, impacting short-term margins.
Tax Rate Variability
The effective tax rate is low due to entities becoming profitable with previous tax losses, causing uncertainty for future tax expenses.
Company Guidance
During the Q1 FY 2026 earnings call, Karooooo provided robust guidance marked by strong financial performance metrics. The company reported an 18% increase in annual recurring revenue (ARR) to ZAR 4.57 million, translating to a 24% increase in USD to $254 million. Subscription revenue constituted 98% of Cartrack revenue, with a commercial ARR retention rate of 95%. Cartrack's subscription revenue grew by 19% to ZAR 1.1 billion, with an operating profit margin of 30%. The LTV to CAC ratio remained above 9x, demonstrating efficient capital allocation and strong customer retention. Karooooo Logistics' revenue also saw a 20% increase to ZAR 121 million. Total revenue for Q1 reached ZAR 1.277 million, reflecting an 18% growth, while earnings per share increased by 19% to ZAR 8.55. The company maintained a Rule of 60 status, with Cartrack's adjusted EBITDA margin at 46%. Additionally, Karooooo ended the quarter with net cash and cash equivalents of ZAR 1.103 million, underscoring their strong balance sheet and dedication to profitable growth.Karooooo Financial Statement Overview
Summary
Karooooo exhibits impressive financial health with strong revenue growth, robust profitability, and a stable balance sheet with low leverage. Cash flows have improved substantially, highlighting excellent cash management. Overall, Karooooo stands out as a financially sound and efficiently managed entity within the software application industry.Income Statement
Karooooo shows robust financial performance with consistent revenue growth and strong profitability. Gross Profit Margin improved to 70.11% in 2025 from 64.00% in 2024. Net Profit Margin increased to 20.17% in 2025 from 17.55% in 2024. Revenue Growth Rate was 8.61% in 2025, showcasing a strong upward trend. EBIT and EBITDA margins are healthy, reflecting operational efficiency.92
Very Positive
Balance Sheet
The balance sheet is strong with a Debt-to-Equity Ratio of 0.23 in 2025, indicating low leverage. The Return on Equity improved to 28.76% in 2025, signifying effective use of equity. The Equity Ratio stands at 63.05%, reflecting a well-capitalized structure. Overall, the company maintains a stable financial position with low financial risk.88
Very Positive
Cash Flow
Karooooo demonstrates solid cash flow performance. Free Cash Flow Growth Rate surged by 2102.97% in 2025, showcasing exceptional improvement. Operating Cash Flow to Net Income Ratio is strong at 2.10, indicating excellent cash conversion. Free Cash Flow to Net Income Ratio is 0.93, reflecting effective cash management despite high capital expenditures.85
Very Positive
| Breakdown | Mar 2025 | Mar 2024 | Mar 2023 | Mar 2022 | Mar 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 4.57B | 4.21B | 3.51B | 2.75B | 2.29B |
| Gross Profit | 3.20B | 2.69B | 2.27B | 1.82B | 1.62B |
| EBITDA | 2.06B | 1.81B | 1.51B | 694.92M | 1.15B |
| Net Income | 921.03M | 738.19M | 597.15M | 449.95M | 497.42M |
Balance Sheet | |||||
| Total Assets | 5.08B | 4.31B | 3.75B | 3.09B | 2.99B |
| Cash, Cash Equivalents and Short-Term Investments | 1.04B | 459.53M | 965.79M | 731.75M | 987.36M |
| Total Debt | 725.09M | 266.81M | 181.32M | 217.28M | 1.03B |
| Total Liabilities | 1.83B | 1.30B | 1.06B | 915.42M | 1.71B |
| Stockholders Equity | 3.20B | 2.96B | 2.66B | 2.15B | 917.17M |
Cash Flow | |||||
| Free Cash Flow | 851.99M | 27.47M | 500.35M | 335.26M | 407.76M |
| Operating Cash Flow | 1.93B | 955.04M | 1.13B | 931.71M | 931.05M |
| Investing Cash Flow | -1.08B | -932.19M | -615.81M | -658.22M | -524.67M |
| Financing Cash Flow | -443.26M | -592.95M | -426.43M | 334.97M | 390.58M |
Karooooo Technical Analysis
Negative
47.78
Price Trends
51.32
Negative
46.63
Positive
45.31
Positive
Market Momentum
-0.09
Negative
45.15
Neutral
54.19
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 47.78 is below the 20-day moving average (MA) of 49.57, below the 50-day MA of 51.32, and above the 200-day MA of 45.31, indicating a neutral trend. The MACD of -0.09 indicates Negative momentum. The RSI at 45.15 is Neutral, neither overbought nor oversold. The STOCH value of 54.19 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 70 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 2 New Risks
1.
Our use of AI and generative AI tools presents risks and challenges that could adversely affect our business and require that we incur substantial costs Q1, 2025
2.
Under certain attribution rules, our non-U.S. subsidiaries are expected to be treated as controlled foreign corporations for U.S. federal income tax purposes, and, as a result, there could be adverse U.S. federal income tax consequences to U.S. investors that own our shares (directly or indirectly) and are treated as "Ten Percent Shareholders." Q1, 2025
Karooooo Peers Comparison
Overall Rating
UnderperformOutperform
Sector (51)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $1.50B | 28.40 | 29.66% | 0.06% | 14.21% | 23.74% | |
71 Outperform | $1.72B | 578.86 | 0.49% | ― | 23.31% | ― | |
67 Neutral | $1.47B | ― | 75.95% | ― | -6.81% | 85.11% | |
64 Neutral | $1.12B | ― | -36.95% | ― | 17.79% | 16.49% | |
63 Neutral | $1.66B | ― | -32.87% | ― | 8.56% | -4.21% | |
59 Neutral | $1.07B | ― | -6.48% | ― | 10.75% | 56.37% | |
51 Neutral | AU$1.66B | 2.46 | -31.66% | 3.59% | 16.55% | -7.79% |
* Technology Sector Average
Performance Comparison
KARO
Karooooo
47.78
19.83
70.95%
SPT
Sprout Social
19.07
-19.13
-50.08%
PRCH
Porch Group
13.26
11.32
583.51%
JAMF
Jamf Holding
8.13
-10.51
-56.38%
OLO
Olo
10.13
5.33
111.04%
AMPL
Amplitude
12.70
4.17
48.89%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
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.