Wednesday, 21 February 2024
by Rose White
I love it when the stock market as a whole reaches the wrong conclusions about a perfectly healthy business. The buying windows opened up by these mistakes can be launching pads for wealth-building investments in the long run.
With that money-making idea in mind, let’s take a look at Fiverr International (NYSE: FVRR).
The freelance services wrangler endured a bit of a slowdown from 2021 to 2023, but the growth story never ended and Fiverr is back to double-digit revenue increases again. Moreover, this company has become a formidable cash machine recently, pocketing 18% of its incoming revenue in the form of free cash flow:
The double-digit sales growth is expected to continue in this week’s fourth-quarter report, as management’s guidance suggests a 10% year-over-year increase to approximately $91.6 million.
And these are the early days of a very ambitious growth plan. The final target is nothing less than “to change how the world works together,” uprooting stale definitions of basic concepts like “work,” “careers,” and “employment.” As a standard bearer of the gig economy, Fiverr is defining and implementing the standards of a next-generation workforce.
Fiverr can pull a lot of levers to achieve its long-term goals.
These factors are accelerating Fiverr’s sales growth again, while also expanding the company’s profit margins. Management’s favorite profit metric is adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), which backs out many non-cash expenses to focus on the cash-based business profits. The margin trends for this metric are quite impressive these days:
Does Fiverr look like a struggling company to you? In my eyes, it’s a perfectly healthy growth stock with inspiring long-term goals and positive trends across many of its most important financial metrics.
Yet, Fiverr’s stock trades at just 16 times adjusted earnings, 3 times sales, and 17 times free cash flows. The stock price is down more than 91% from the all-time highs three years ago. And the Street isn’t adjusting to Fiverr’s robust growth prospects, either, as shares still trade 38% below its yearly peak.
There you have it. Fiverr’s stock chart and valuation ratios suggest a company in dire financial straits, but the business is getting back on its feet after a couple of rough years and the long-term growth story remains downright inspiring.
I can’t promise that the upcoming earnings report will send Fiverr’s stock skyward, but you know what they say about the stock market weighing each company’s business success in the long run. Luck favors the prepared, and you should consider starting a Fiverr investment before Mr. Market comes to his proverbial senses.
Should you invest $1,000 in Fiverr International right now?
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Anders Bylund has positions in Fiverr International. The Motley Fool has positions in and recommends Fiverr International. The Motley Fool has a disclosure policy.