Shares of Fiverr International(NYSE: FVRR) are up by 34% since early November, 2023. Analysts' consensus projections suggest 14% year-over-year revenue growth and 88% higher earnings when the online marketplace for freelance services reports fourth-quarter results in two weeks. The company's compound average growth rate (CAGR) on the top line works out to 29% over the last three years, and that trendline is pointing upward again after struggling through molasses for a couple of years.
FVRR Revenue (TTM) data by YCharts
Fiverr is clearly on a roll -- it must be too late to invest in this skyrocketing growth story, right?
Well, not so fast. Everything I just told you is entirely true, except the idea that it's too late to jump aboard Fiverr's bandwagon. It's just not the whole story.
So grab your favorite beverage (black coffee, no sugar, please) and sit back for a while. I'll show you that Fiverr still looks downright cheap, how the company has a bright future, and why I can't stop buying Fiver shares whenever I have some investable cash on hand.
Fiverr stock is cheap
The big price jump I mentioned above is a very recent thing -- bouncing back from a dark and dank rock-bottom price drop. Zoom out to a more comprehensive view and you'll find that Fiverr's stock trades more than 90% below an all-time high of $323 per share, reached in early 2021:
At the same time, Fiverr's revenue growth slowed down but never stopped, and the company's free cash flows have surged to record highs in recent quarters. The business is booming while share prices are way down. Hence, the stock trades at the red-tag valuation ratios of 17 times free cash flow and 3 times sales.
Never mind comparing Fiverr's valuation ratios to other tech stocks with a history (and future projections) of extremely rapid sales growth. Fiverr is a steal next to deep-discount value investments such as big-box retailers, power-grid utilities, or toothpaste manufacturers. Yet, none of these value-stock favorites can compete with Fiverr's high-octane growth.
Fiverr is an innovator with game-changing ideas
The company's founders had big dreams from the start. The overarching goal from day one was to "revolutionize how the world works together."
Fiverr is a poster child of the gig economy, where an ocean of freelance and contractor opportunities replaces the traditional concept of lifelong careers. Why plead loyalty to a faceless corporation and six levels of increasingly distant managers when you can be your own boss?
The gig economy is full of rivals in tightly defined niches, but very few competitors can be seen as direct Fiverr rivals. From an investor's perspective, only two head-to-head challengers are available on the U.S. stock market. And in this tightly knit group, Fiverr stands head and shoulders above the others in my view:
- 99designs only offers freelance services in graphic design and related disciplines, and is a much smaller business than Fiver overall. And you can't make a direct investment in this particular competitor -- custom printing expert Cimpress(NASDAQ: CMPR) bought the company in 2020 to fold it into the Vistaprint business. 99Designs had a 12-year total of $300 million in freelance service payouts at the time while Cimpress as a whole collects more than $3 billion of top-line revenues per year. Ergo, 99designs is a vanishingly small cog in the greater Cimpress machine.
- Upwork(NASDAQ: UPWK) is a clearer alternative, with a deeper focus on ensuring top-quality services than Fiverr's quicker and simpler client-to-freelancer relationships. I respect that approach and Upwork's annual revenue stream is about twice as deep as Fiverr's right now. But Fiverr's cash-based profit margins are much wider than Upwork's, indicating a more effective business model and greater long-term profitability prospects. Yet, Upwork shares are changing hands at 57 times free cash flow. I'd much rather own the lower-priced and faster-growing freelancing expert with wider cash margins.
And Fiverr isn't sitting on its digital hands, either. For example, the latest round of product releases introduced a new category of consulting services, where buyers can set up long-term relationships with their favorite freelancers. There's also an expanded partnership with agencies funneling expertise to end-market clients and work to freelancers with the help of Fiverr's existing tools. The rating and reviews system got a fresh coat of paint, too. Fiverr calls the new setup "a radical level of transparency" in both directions.
Image source: Getty Images.
Fiverr is one of my best investing ideas right now
There you have it. Fiverr is a race car disguised as an old beater, barely capable of rolling out of the driveway. It's just waiting for cheaper gas, metaphorically speaking, so people will give it a wash and some wax before taking it for a spin on the interstate. That's what an official end to the inflation-based economic strife should do for Fiverr, perhaps as early as later this year.
That's why I keep coming back to Fiverr whenever a few dollars are sloshing around in my investing accounts. In fact, I'm sorely tempted to revisit this buying window before the earnings report on Feb. 22. The struggling economy is finding its sea legs again, and that should be good news for Fiverr and its shareholders.
And if I'm wrong, I probably won't mind dipping into the Fiver opportunity yet again at an even lower price. One quarterly report will not likely wipe out Fiverr's long-term growth story. Investing is a marathon and not a sprint, you know.
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Anders Bylund has positions in Fiverr International. The Motley Fool has positions in and recommends Fiverr International. The Motley Fool recommends Upwork. The Motley Fool has a disclosure policy.
