3 reasons why I think the Freelancer Ltd share price is a buy

I think the Freelancer Ltd (ASX: FLN) share price is attractive, the business could be a future blue chip of Australia. This business is the owner of one of the largest freelancer portals in the world. It’s hard to find many businesses that are growing at a rapid rate that have long-term potential.

Here are three reasons why I think Freelancer could be a long-term buy today:

Attractive business model

Freelancer has spent a long time and a lot of money making its website one of the biggest and most user friendly in the world. This attracts the widest pool of freelancers and the most people seeking help with a project. It is a virtuous circle that helps Freelancer stay at the top.

It’s such a popular idea not only because it attracts a wide pool of talent but also because it has the potential for attracting cheaper and higher quality freelancers too.

Globalisation of the internet

People used to use the internet to find service from someone in the same country as them. Freelancer gives people the power to find other users from anywhere in the world. This gives Freelancer a huge potential client base to advertise to.

The globalisation of the internet is why the business saw its net revenue grow by 37% in its latest results for the year to 31 December 2016. Countries like China, India and other Asian countries have huge populations that could increase Freelancer’s pool of users.

Strong growth

Freelancer is on the cusp of generating a net profit after tax after paying for all of its expenses. This means that a lot of future revenue growth should fall mostly to the bottom line.

In a market update on 27 April 2017, Freelancer disclosed that its cash receipts for the first quarter of the 2017 year was up 20% on the prior corresponding period. I think there could be many more years of double digit growth for Freelancer.

Foolish takeaway

Freelancer isn’t yet making a profit or paying a dividend so it’s harder to value with traditional metrics. It is trading 58% lower than its all-time high in January 2016.

I think it could be worth a long-term buy at the current price as long as investors give the business enough time to grow and reach its potential.

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Motley Fool contributor Tristan Harrison 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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