A quantitative analysis of investing in Careem
Calculations in the previous section showed that Careem’s GO and Business yield a higher return for the investor. That is, a rational investor looking for higher gains would most likely go for an investment in Careem. This section determines in which of the three categories the investor should put forth the requirement level of investment in.
The graphs below shows the yearly revenue of each of the three categories of Careem:
Our analysis suggests that Careem’s GO yields the highest amount of revenue on an annual basis. The main assumption that we have put forth is that Careem GO is the most used service out of the three. Due to Careem Business’s high prices, it is the worst performing segment out of the three in terms of the volume generated (3 rides per day) but makes up a significant bulk of its revenue through its high prices. Since, Careem’s GO+ charges higher rates than GO, it is used more frequently than Business but less so than GO.
Annual net profit suggests that the investor will earn the highest level of net income by investing in Careem’s Business service. This is primarily due to the fact that it charges higher base, running and per minute rate than two of its counterparts. Moreover, the business category earns high revenues due to its lower expense due to the low number of trips per day, resulting in less distance travelled in a year. On the contrary, Careem GO’s profit it primarily determined by the volume it generates due to its low charges.
Table above shows few of the other measures that can be used to evaluate the three investment options. As the table shows, Careem GO generates the highest return as a percentage of the total investment for the investor. Similarly, GO has the shortest payback period, which suggests that investors will recoup their money in the shortest period by investing in Careem GO.
The NPV also reiterates this point and a high figure indicates that this particular option will generate the highest value for the investor. On a side note, Careem’s GO+ also has a high NPV and when coupled with other advantages, it makes a strong case for a potential investment.