The stock market has taken many sharp turns lately. In this volatile market, inspired by improvements and setbacks in the ongoing battle against soaring inflation, some robust growth stocks with great long-term prospects have taken game-changing haircuts.
My favorite example of this mismatch between strong growth prospects and bargain-bin stock prices is Fiverr International (FVRR 3.74%). The freelancer marketplace operator's stock has lost half of its value this year, continuing a downtrend that started in early 2021.
But all Fiverr has done is to run a successful business, surprise Wall Street's analysts on a regular basis, and breathe new life into a stalled growth curve.
Fiverr's stock is ridiculously undervalued these days, and I can't stop buying it at these bargain-bin prices. Let me show you why,
Fiverr's robust revenue runway
First, here's a quick look at Fiverr's revenue growth in the last two years. The inflation panic weighed on the company's sales growth, as people and businesses held on tight to their purse strings in a challenging economy.
But the downtrend ended with an uptick in the second quarter of 2023, and last week's third-quarter report delivered double-digit percentage growth again. And Fiverr's top line never stopped growing year over year, even in the darkest days. Rumors of this company's dead revenue growth are wildly exaggerated -- Fiverr is still a high-octane growth stock:
FVRR Revenue (Quarterly YoY Growth) data by YCharts
The financial fortitude of Fiverr's cash flow
More to the point, Fiverr's cash profits have never been beefier. The company collected $23 million of free cash flow in the third quarter, which works out to 25% of incoming revenues. We are looking at a hyper-effective cash machine here. Again, the cash never stopped rolling in, and cash is king in the business world:
FVRR Free Cash Flow (Quarterly) data by YCharts
Why Fiverr's stock is a cut above the rest
So Fiverr is making money hand over fist. Its revenue growth hit a brutal speed bump in the inflation crisis but is back to double-digit percentage rates again. And the company is still on a mission to disrupt the basic concepts of "work," "careers," and "business practices" in the vanguard of the gig economy revolution.
I can buy this excellent stock at more than a 90% discount from its all-time highs, at the modest valuation of 10.6 times forward earnings projections and 2.5 times sales? Somebody, please give me a "buy" button.
Image source: Getty Images.
Remember when Dwayne "The Rock" Johnson went bald in 2010? The new hairstyle launched a whole new era in his fascinating career. Buying Fiverr shares at today's ultra-low stock price should set you up for long-term success, too. See, radical haircuts don't always mean there's something wrong.
In this case, it's just a big misunderstanding that opened a fantastic buy-in window. Fiverr is my top growth stock to buy now, and it's not a close race.
