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Karooooo (KARO)
NASDAQ:KARO
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Karooooo
(NASDAQ:KARO)
Rating:80Outperform
Price Target:
$54.00
▲(14.50% Upside)
Positive Factors
Business Strategy
The company's strategy of providing a vertically integrated telematics solution is seen as a superior product and business strategy driving customer satisfaction and market share gains.
Market Valuation
Karooooo’s shares are attractively valued at 10x EBITDA, a discount to supply chain peers at 25x, with the potential for the multiple to rerate higher.
Subscriber Growth
Karooooo reported solid Q1 results with strong growth in subscribers including total growth of 16.5%.
Negative Factors
External Concerns
Concerns in the national power grid have led to a 25% discount in the target multiple compared to SaaS peers.
Growth Expectations
ARR per subscriber will grow 4.5% Y/Y in FY26 versus prior management commentary for 6% growth.
Market Risks
The main risks for Karooooo are competition, emerging markets, foreign exchange, and customer churn.
Karooooo (KARO) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$1.46B
Dividend Yield2.65%
Average Volume (3M)62.00K
Price to Earnings (P/E)27.5
Beta (1Y)1.29
Revenue Growth14.21%
EPS Growth23.74%
CountryUS
Employees4,387
SectorTechnology
Sector Strength89
IndustrySoftware - Application
Share Statistics
EPS (TTM)0.48
Shares Outstanding30,893,300
10 Day Avg. Volume56,806
30 Day Avg. Volume62,001
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)0.00
Price to Sales (P/S)0.00
P/FCF Ratio0.00
Enterprise Value/Market Cap1.16
Enterprise Value/Revenue0.37
Enterprise Value/Gross Profit0.53
Enterprise Value/Ebitda1.13
Forecast
1Y Price Target
$55.25Price Target Upside17.15% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering5
Karooooo Business Overview & Revenue Model
Company DescriptionKarooooo Ltd. is a leading provider of a comprehensive, cloud-based software platform for connected vehicles and equipment, operating primarily in the telematics sector. The company is headquartered in Singapore and delivers a suite of services under the brand Cartrack, which includes real-time vehicle tracking, fleet management, and insurance telematics. Karooooo's platform is designed to help businesses increase the efficiency and safety of their vehicle operations, reduce operational costs, and enhance customer engagement.
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: -4.22%|
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
Positive
47.16
Price Trends
47.85
Negative
46.14
Positive
44.69
Positive
Market Momentum
-0.48
Negative
53.99
Neutral
54.69
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For KARO, the sentiment is Positive. The current price of 47.16 is above the 20-day moving average (MA) of 45.99, below the 50-day MA of 47.85, and above the 200-day MA of 44.69, indicating a neutral trend. The MACD of -0.48 indicates Negative momentum. The RSI at 53.99 is Neutral, neither overbought nor oversold. The STOCH value of 54.69 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive 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 (61)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
80 Outperform | $1.46B | 27.54 | 29.66% | 2.65% | 14.21% | 23.74% | |
67 Neutral | $1.73B | 593.71 | -0.13% | ― | 21.92% | 95.91% | |
63 Neutral | $1.60B | 33.06 | 75.95% | ― | -7.41% | ― | |
63 Neutral | $819.73M | ― | -32.50% | ― | 14.79% | 27.52% | |
62 Neutral | $1.13B | ― | -6.68% | ― | 11.36% | 46.67% | |
61 Neutral | $36.32B | 7.30 | -7.27% | 1.96% | 7.76% | -6.42% | |
57 Neutral | $1.52B | ― | -33.99% | ― | 9.93% | -11.15% |
* Technology Sector Average
Performance Comparison
KARO
Karooooo
47.16
11.90
33.75%
SPT
Sprout Social
14.11
-20.03
-58.67%
PRCH
Porch Group
15.34
13.98
1027.94%
JAMF
Jamf Holding
8.39
-10.20
-54.87%
OLO
Olo
10.21
4.75
87.00%
AMPL
Amplitude
11.47
2.85
33.06%
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.