Why Freelancer Ltd shares are soaring today

Freelancer Ltd (ASX:FLN) shares are soaring today.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares in Freelancer Ltd (ASX: FLN) lifted more than 6 per cent to $1.76 today after the online marketplace for job seekers and recruiters posted another quarter of positive operating cashflow of around $360,000.

Total cash receipts for the quarter were $11.9 million, up 62% over the prior corresponding period, with cash in hand of $32.2 million as at quarter end.

Freelancer operates on a calendar year basis and expects to report full year results on February 23, with expectations for positive operating cashflow over the full year.

More important is the prospect of another strong year of growth in 2016 due to the business sitting slap bang in the middle of the growing digital economy.

The business also completed the acquisition of Escrow.com in the quarter, which is essentially a provider of online escrow account services in collecting, holding, and disbursing buyer and seller funds according to their instructions.

The Escrow.com acquisition is significant in giving Freelancer more vertical integration and as a source of future growth via its ability to skim fees on the huge payment volumes transacting across the Freelancer business.

The Freelancer website is reportedly the world's largest digital marketplace for freelance work, with around 18 million registered users to date that have posted more than 8 million jobs. The jobs posted commonly require digital tasks like website development, design, SEO marketing and mobile application development.

Evidently this is a business with powerful digital tailwinds that is seeking to build the same kind of competitive advantages possessed by larger online operators like SEEK Limited (ASX: SEK) and REA Group Limited (ASX: REA).

These kinds of websites enjoy powerful network effects as their market-leading popularity attracts the most buyers and sellers to provide the website operator with pricing power, a moat, and substantial advantages over smaller competitors.

Freelancer does have a large US-based rival called Elance.com that has existed since 1999, although the global marketplace for online freelance jobs is huge and easily large enough to support several large competitors as this space continues to grow.

Freelancer looks a fast-growing digital business with a lot of potential, but it's no secret and the valuation around $820 million is large compared to the operating earnings of just $360,000 posted in the most recent quarter.

Investors then need to be aware that the company is priced to deliver strong growth long into the future and any hiccups could result in the fast-rising share price quickly reversing course.

Motley Fool contributor Tom Richardson owns shares of REA Group Limited. You can find Tom on Twitter @tommyr345 Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. 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.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »