Freelancer Ltd shares soar on rocketing quarterly growth

Credit: kropeekk_pl

The share price of Freelancer Ltd (ASX: FLN) continues to climb higher following the company’s release of its first quarter results. The 2% gain today now means the shares have risen by over 31% in the last month.

The company delivered a brilliant first quarter of fiscal 2016 with record cash receipts. A few highlights are as follows:

  • Cash receipts of $12.8 million, up 60% from the same period last year.
  • Positive operating cash flow of $1.95 million.
  • Cash and equivalents increased to $33.1 million.
  • Total registered users of almost 19 million.
  • Over 626,000 job listings added in the quarter with impressive growth in February and March.

These results are very positive and go some way to justifying the rapid rise in its share price following a buy recommendation from Swiss global financial services giant UBS.

The good news is that the $1.85 target price that UBS placed on Freelancer is still a good 14% higher than the price the shares are changing hands at today. This could mean there’s upside remaining for investors that missed out on the most recent rally.

The growth ahead for Freelancer could be incredible. Analysts at UBS believe the total addressable market the company works in could reach as high as $275 billion in the future. As the company is currently the market-leader, this puts it in a fantastic position to capture the growth.

It’s not hard to see why the market could grow to be worth hundreds of billions. UBS estimated that a contract that normally costs small businesses $2,000, could be as little as $200 through Freelancer’s worldwide network of freelancers. These savings are likely to be appealing for small businesses looking to cut costs.

If I were forced to choose between investing in Freelancer and SEEK Limited (ASX: SEK), I would favour Freelancer today due to its growth potential.

According to the brokerage arm of Commonwealth Bank of Australia (ASX: CBA), analysts are expecting Freelancer to grow its earnings by 67% per annum for the next couple of years. SEEK is only expected to grow at around 4% per annum.

It is worth pointing out that much like SEEK, Freelancer is actively looking for growth in different areas. The company acquired for $7.5 million cash last year. Escrow aims to remove risk from online transactions with its payment intermediary services.

Things do look bright for the business which has partnered with eBay and FedEx. It grew its cash receipts by 18% over the same period last year and has now overseen $2.7 billion worth of transactions through its platform.

Foolish takeaway

Freelancer is a growing company which certainly has a lot going for it at the moment. If you are looking for growth shares then this could be the one for you. But as the market has such incredibly high expectations, the share price could be volatile at times if this growth looks threatened. If you would prefer to invest in something a little more stable, then perhaps give Freelancer a miss and take a look at these three quality new breed blue chip shares which offer growth and income.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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