There's no question that the "gig economy" is growing. More and more people are leaving the 9-to-5 life in favor of freelance work. But what stock is the best way to invest in this trend? In this Fool Live video clip, recorded on April 15, contributor Brian Feroldi explains why Fiverr International (FVRR 3.39%) could be a great gig economy stock to buy right now. 

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Brian Feroldi: I'm going to talk about, not one-for, not two-for, not three-for, but Fiverr. Ticker symbol FVRR. This is an $8 billion company currently trading for about $220 per share roughly. It has been a market thumper since coming public in 2019, although recently it's fallen. It's down about 30% from its high.

What does this company do? It is a global marketplace for finding online talent. If you are a freelancer, this is a place to sell your services, if you are looking to hire freelancers, this is a place to go and find talent along the globe. Company was founded in 2010. I love the mission, the mission is to change how the world works together. Awesome. It's short, simple, optionable, fantastic. About 550 total employees.

2020 was a phenomenal year for this company, 77% revenue growth. They are a tech company at their core and over time they have a history of rolling out new products and new services. They constantly are adding new categories that you can go to to hire talent. The primary business model here is called service as a product, AKA, you go there and you can hire a professional to do some kind of service for you. They get rave reviews from both buyers and sellers. Net Promoter Score of 67 on buyers and 79 as sellers. It's a two-sided network marketplace here. They think that the more sellers they get, the more buyers they get, the more categories they have. It's a flywheel that is building a competitive advantage for the company.

The rough model is, here's how it works, let's say the product or service costs $100, the seller lists the services for $100, they pay $105, that $5 goes to Fiverr, and then of that $100 the person that does the order gets $80. It's for every $100 the company's take rate is about $25. Really good. They have several long-term growth drivers working in their favor, and they have a few different business models right now. The first is their core marketplace, but they do have a history of rolling out new products and new services that are actually growing rapidly. I can see that, optionality.

They have a history of attracting more buyers to their platform, 3.4 million last year, and those buyers are spending more. Once you get signed up on Fiverr, they are ramping up the number of the dollar spending per buyer. Both of those things have added together to create enormous revenue growth and very consistent revenue growth. Moreover, they are using that increased scale to drive operating leverage, so costs as a percent of their sales are rapidly declining.

Most of that is due to the high revenue growth. How is this? "Momentum in 2020 continues into 2021, we expect elevated engagement levels shown in 2020 to last beyond the pandemic." They don't think the pandemic was a one-time boost, they thinking it gave them a tremendous boost that's going to continue. This business is awesome, 83% adjusted gross margin. That was up 330 basis points over the prior year. On a GAAP basis, they are losing money, although not much. On a free cash flow basis, which I'd more care about, they are free-cash-flow positive. For the first quarter, they're estimating 85% revenue growth, and almost 48% revenue growth, for the full year.

Balance sheet, there's a lot here, but it looks good: tons of cash, and the only debt that they have is some convertible notes, those are going to convert and probably become shares, but the company could pay them off if it wants to. Operating leverage has been kicking in, so you've seen margins improvement.

This is a founder-led businesses, the co-founder here is Micha Kaufman, he's the CEO. The other co-founder, Shai Wininger, left to work on another company you may have heard of, Lemonade. Kaufman gets really, really good Glassdoor reviews, 4.4 stars out of 5, 96% CEO approval rating, 88% will recommend that to a friend, and he also owns 6% of the business. Insiders in general own 16% of this business.

What's the TAM here? Huge, absolutely huge. The company thinks that it can enter multiple categories, and it's talking about $115 billion addressable market opportunity. Meanwhile the real disruption here is that freelancing today is still an old-school business. Most freelancers are hired through word of mouth. The penetration rate for online freelance is minuscule. Could this grow over time as the world becomes more global? I think the odds are favorable.

For this year, Wall Street expects 52% revenue growth, and then another 32% revenue growth next year. There are some risks to keep in mind. Number one would be Upwork (UPWK 1.88%), Upwork is actually bigger than Fiverr is. Or actually they might have caught up. But from a revenue perspective, Upwork is bigger. But Fiverr has been taking market share from Upwork over the last couple of years. What are the big risks to watch though? Is just the take rate. It has a very healthy take rate, could that decline over time? It's entirely possible.

The other possible thing to watch is that if you are hired on Fiverr, like once you get a relationship with a company, could you go around Fiverr to go for billing? That is a risk. You joined the platform, you find a client, you find a buyer, and then you move off-platform to avoid that take rate, hasn't happened in droves just yet, and there are tons of people on this platform that sell their services to multiple companies, so Fiverr will be the glue that holds them together, but it is a risk to watch.

Here is the revenue growth difference between these two companies. Upwork, which I previously thought had an unassailable note, and then along came Fiverr that said, "Nope, we're going to outgrow you." But this shows the revenue difference between the two. Upwork is almost double the size of Fiverr. Although again, Fiverr is growing much faster and taking market share. Despite being on sale, still expensive, about 39 times sales. That number is wrong. It's about 200 times forward earnings.

However, given the embedded operating leverage and everything else, I don't think that that is insane, it's high, but it's not insane. I tweeted about this company about a couple of months ago. Let's see: high revenue growth, recurring revenue, gross margin, free cashflow, great mission statement. It checks all the boxes for me, so Fiverr.