A catalyst refers to an event that has occurred in a company, typically within the last 12 months, that would significantly increase its valuation. The value of a company is based on its future ability to generate free cash flow.
Therefore, a catalyst usually improves free cash flow, resulting in a higher implied valuation both because of the better future performance and because of a better implied multiple.
According to Wikipedia, a catalyst is “in a simplified sense, good news or a press release to get people interested in the stock again.Stock catalysts often change investor sentiment and can mark the beginning or end of stock trends. They may affect the perception of a company's discounted future cash flows.”