Cartrack Vs Mix Telematics

22 April 2020 By PDSNET

Two of the most interesting companies listed on the JSE are Cartrack (CTK) and Mix Telematics (MIX). Both companies are involved in providing remote fleet and asset management systems. Both companies started in South Africa recovering stolen vehicles and both have spread across the world expanding their client base and broadening their product options.

As listed shares, both companies have the distinct advantage that the majority of their income takes the form of annuity income. They also service companies with almost no working capital - which means that their income is fairly secure, even in these difficult times. They also both offer a rand-hedge element.

A comparative relative strength chart of Cartrack against Mix Telematics shows the following:

Comparative Relative Strength Cartrack (CTK) and Mix Telematics (MIX) January 2016 to April 2020 - Chart by ShareFriend Pro

As you can see here, in 2016 to 2018, Mix Telematics was out-performing Cartrack consistently, but since then Cartrack has been doing better.

This is also reflected in the two companies' P:E ratios. Mix Telematics is on a price:earnings ratio (P:E) of 15,98 while Cartrack is on a P:E of over 60.

As a private investor this situation should raise some questions. Why do investors favour Cartrack so much more than Mix Telematics? Is there an opportunity here?

Mix Telematics claims 817000 subscribers with 87% of its income in subscriptions (i.e. annuity income) and an EBITDA margin of 30%.

Cartrack claims 1039000 subscribers with 96% of its income in subscriptions and an EBITDA margin of 51%.

Cartrack trades an average of 24% more in rands per day than Mix Telematics - which perhaps shows that Cartrack is more favoured by institutional investors. Both companies have more than enough liquidity in their shares for private investors.

On paper, Cartrack is out-performing Mix Telematics by a healthy margin although both companies are growing rapidly.

Perhaps the best method of seeing which company offers the best value right now is to look at their price:earnings growth ratios (PEG).

Table Comparing the PEG ratio of Cartrack and Mix Telematics from 2015 to 2019

The table above shows the percentage in earnings per share (EPS) of the two companies going back to 2015 and then uses that to calculate their respective PEG ratios.

Surprisingly, Cartrack's average growth in earnings over that 5-year period (15,75%) is noticeably less than Mix Telematics's (20,54%) - a fact which is clearly not reflected in their share prices.

This leaves Cartrack with a PEG of 0,26 while Mixtel has a PEG of 1,29 (if you are not sure about PEG ratios, go to Module 10: P:E and EPS as a Measure of Share Value).

This shows that Mix Telematics offers far more value that Cartrack at current prices and Cartrack looks distinctly over-priced.

Of course, that does not necessarily mean that Mix Telematics shares will do better in the future - but it is certainly a starting point for investigation.  

 


DISCLAIMER

All information and data contained within the PDSnet Articles is for informational purposes only. PDSnet makes no representations as to the accuracy, completeness, suitability, or validity, of any information, and shall not be liable for any errors, omissions, or any losses, injuries, or damages arising from its display or use. Information in the PDSnet Articles are based on the author’s opinion and experience and should not be considered professional financial investment advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Thoughts and opinions will also change from time to time as more information is accumulated. PDSnet reserves the right to delete any comment or opinion for any reason.



Share this article:

PDSNET ARTICLES

Distell

Quality of management is a vital indicator for the private investor. High quality management is the best guarantee of future profits and sustainability in any share, especially in the volatile and unpredictable environment of South Africa. COVID-19 and the recent civil unrest have given investors a unique opportunity to evaluate the quality of management

Opportunity Knocks

As a private investor, you need to develop a view on where exactly you think the market is in its cycle – is it expensive and close to the top, cheap and close to the bottom or somewhere in the middle? There can be very little doubt that investors generally move from being optimistic about the future to being pessimistic - and back again

Capitalising on Chaos

The most dangerous man is the one who has nothing to lose. He is not afraid of imprisonment because at least there he will have a roof over his head, food and clothing. For the past 12 years South Africa has been bringing much of its population to that point of desperation. Unemployment, the lack of service delivery and extreme poverty have become endemic.

At

Our Aveng Story

On 22nd October 2018 we ran an article entitled “Speculating on Aveng”, ( click here to read it ), in which we suggested that buying R10 000 worth of Aveng at 5c a share might be a worthwhile speculation for private investors. As we said in the article, we do not usually advise

The Confidential Report - July 2021

America

The US inflation rate rose to 5% in May 2021 – up from April’s 4,2% and March’s 2,6%. At the same time, there is evidence that employee costs (i.e. wages) are rising at the rate of 2,8% on average. Employees are also changing jobs more rapidly with the “quit rate” rising to 2,7%. This shows that employees are moving

More Fundamentals

In last week’s article we suggested that it was important to understand where a company was in its financial cycle and to download its most recent financial results in PDF format. Since then, one of South Africa’s best and most iconic companies, Hudaco, has published its interim financial results for the six months to 31st May 2021 (

Fundamental Context

The assessment of shares is divided into fundamental analysis and technical analysis. The fundamentalist is trying to answer this question, “How good will this company be as a payer of dividends in the future ?” This requires an in-depth study of everything about the company starting with its most recent financials.

Market Action

In general, we encourage investors to take a medium to long-term view of the market and not to get involved in “trading” or intra-day buying and selling, especially in highly geared derivative instruments.

However, watching the intra-day progress of the S&P500 index and other indicators

Market Update

The S&P500 has virtually completed its seventh “mini-correction” on Friday the 4th of June 2021, since the V-bottom of the pandemic in March 2020. It exceeded its previous all-time high closing level of 4232.6, reaching an intra-day high of 4233.45. That it would probably go to a new record high was indicated by its record intra-day high

The Confidential Report - June 2021

America

In the previous Confidential Report on 5th May 2021, when the S&P500 index was at 4167, we suggested that it was probably due for a correction. Over the last month we have watched as a correction unfolded in that index. However, it turned out to be only a mini-correction of just 4% - and as we pointed out in our article,