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Did you analyse the capital efficiency like Return on capital, return on equity and so on?

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The metrics improved significantly in the past years with the improved profitability. ROC improved from 15% in 2018 to 54 % now and ROE from 14 % to 57 %

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No one can deny their impressive growth and execution, but why do you think their brand is not just a fad? Can you describe what goes on in the mind of their target customer?

How are their competitors reacting (ie, maybe making their products safer, cooler, etc), given they've lost significant share in a very sudden way, and is there anything in Leat's business model that insulates the company from this?

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The brand "Leatt" exists since 2006 and is successful and recognized as a safety brand, which in particular started with their Neck brace. Their current success is primarily due to very good execution by transferring this safety attribute to other product categories, and also in categories like apparel. The new attribute for the brand (since launch of products that are not primarily for safety) is that Leatt is a cool brand. This attribute depends more on the fashion taste of the customers. So this could eventually be a fad. But i think it still also relies on the safety aspect. When a rider for example likes Leatt armor or neck braces for safety reasons, he may also want Leatt apparel gear, for a uniform look.

The only market where Leatt is a market leader yet, is the neck brace market. A market that Leatt invented with his product. Competitors of course reacted with similar neck brace products and when you look at survey's etc you will see that Leatt lost market share over time on this category, but this is not spectacular as the market share was over 50%. In most of the other products categories Leatt still has a market share of below 5 %, while other competitors have a market share of over 30% for example. So even when Leatt is gaining market share here, the competitors don't really react to that. It's not a significant loss there at the moment. At one point when Leatt becomes a bigger competitor this question can come up, but it's still a long way.

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Ok thanks for your thoughts

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They could be stuck with massive increase in inventory and unable to sell off. (affecting their cashflow) Alot of small and undercapitalised companies are facing issues like this. Just a personal observations.

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Thanks, yes inventory is definitely a point one has to look at in the coming quarters. In the past the management of Leatt was quite good in managing their wokring capital as they did not need external money to achieve the rapid growth in the past. But inventory increased significantly in the recent past so that could be an issue. The higher inventory is partially explanable by the new and bigger warehouse in Reno they've build. In addition the management said that a big part of the inventory is helmets and protection gear and not apparel where the sales cycles are much faster and the probability of a write-off is much higher when they're not able to sell it.

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