ASX-listed Freelancer Ltd (ASX: FLN) claims to be the world's largest online freelancing and crowdsourcing marketplace by number of users and projects, although the market seems unimpressed with the stock off 2.5% to head towards multi-year lows.
The company says it connects over 23 million employers and freelancers globally to perform tasks that are commonly digital in nature such as website development, software development, online marketing, search engine optimisation or graphic design.
As such it sits at the heart of the growing digital economy and should have a decent long-term outlook thanks to a network effect it can create in attracting the largest numbers of qualified job seekers to match with employers seeking casual employees.
However, with the shares changing hands for 78.5 cents this afternoon and down 50% over the past year it seems buying Freelancer shares has proven more of a ticket to Centrelink than a ticket to escaping the rat race recently.
So why is this?
So far as a listed entity its growth rates have not been as strong as anticipated and today it reported cash receipts of $12.5 million for the quarter ending March 31 2017, which is up 20% on a rolling basis compared to the prior corresponding period.
The company also posted a positive operating cash flow just over $2 million for the quarter, which goes to show the attractive scalability and low-cost business model of a digital marketplace such as Freelancer that has a low capital intensity.
The balance sheet is also in excellent shape with no debt and around $34 million in cash on hand, which means this nicely growing business is starting to tick the boxes as an investment option based on some of its fundamentals.
Freelancer reports on a calendar year basis and holding the share price back may be the market's disappoint over just $4.5 million in positive operating cash flows over the whole of 2016.
Notably, the company's valuation probably got way ahead of itself over the past couple of years and according to Commsec it's still valued around $367 million, versus the latest quarterly cash flows of just over $2 million.
Overall then it looks like Freelancer shares are no bargain, but are definitely coming back into the kind of territory that would make them attractive value for investors who believe in its long-term growth story.
The primary risks remain around powerful competition from mainly U.S. tech giants like Upwork, Elance and Guru muscling into Freelancer's market share and putting "project fee" pressure on its operating margins.
For my money, Freelancer remains a stock for the watch list as I can't help feeling there might be some better investment options available on the ASX.
