Time in the market beats timing the market. That's no secret. Legendary investors didn't make their fortune by day-trading the hottest stock tips, but by holding stocks of game-changing market leaders for many years or even decades.
That said, even Warren Buffett prefers buying incredible businesses at a great price. That long-term holding period gets so much sweeter when you take off from a deeply undervalued starting point.
That's what Fiverr International (FVRR +1.11%) is today -- an undervalued growth stock with a modest share price and tremendous long-term business prospects.
Fiverr's frisky business
This company's ambition is nothing short of revolutionary.
As a leading name in the gig economy, Fiverr wants to "change how the world works together." Management estimated the American addressable market for creative, technical, and professional freelancers to be worth $247 billion in 2021 and nearly all of it is managed through offline channels. Fiverr and Upwork (UPWK +2.74%) are the biggest names by far in this field, and their revenues added up to just $1.1 billion last year. The untapped opportunity is enormous.
So Fiverr has a long way to go and the company is off to a strong start.
- Fiverr boasts 4.1 million active service buyers.
- Annual revenues rose by 7% in 2023 and 13% in the inflation-stricken market of 2022.
- The company is finding new ways to serve its clients (both buyers and sellers) and pocket fresh revenue streams. The Fiverr Pro and Fiverr Enterprise services are quickly emerging as serious drivers on new business, and the Fiverr Neo chatbot highlights the company's ability to tap into customer-friendly technology trends. Fiverr introduced all three in 2023.
- The business is comfortably profitable, with growing profits across the board. Earnings turned positive in 2023 while free cash flows rose 28% to $82 million.
You're looking at a perfectly healthy company here, pursuing high-octane growth in a massive market with even greater prospects if you include Fiverr's international expansion plans -- and the company is already turning a profit.
But the stock keeps falling
Yet, many investors still can't get over the image of Fiverr's freelance services as the epitome of a pandemic lockdown idea. The company was supposed to run out of growth fuel when effective vaccines started restoring the remote-work business world to more traditional operations.
So Fiverr's stock trades 94% below the all-time highs of early 2021, just before the COVID-19 vaccine rollout started. The stock is changing hands at the bargain-bin valuation of 9.8 times free cash flow or 2.2 times sales. And the skeptics are still running the Fiverr show. Share prices are down by 42% over the last year, including a 26% drop year-to-date.
Long story short, Fiverr is an ambitious and profitable company with grand growth plans and the ambition to change the nature of work and careers.
Bearish investors see a falling knife here, more likely to hurt your hands than help your portfolio if you tried to catch it on the way down.
NYSE: FVRR
Key Data Points
Mr. Market is making a big mistake with Fiverr
I disagree. In my eyes, Fiverr is a deeply undervalued growth stock with tremendous potential to make money in the long term. I'd be a buyer at any reasonable valuation, and the current discount makes it a no-brainer buy in my book.
Fiverr is on the short list of great deals I'll look at first, whenever I find new money to invest. And I highly recommend adding this stock to your own list of promising "buy" ideas. Just getting back to the record price of early 2021 would be a 20-fold return on today's investment. Sales have nearly doubled since then, and free cash flows are up more than 500%.
This hungry little freelance services orchestrator is going places.
