Did Changing Sentiment Drive Freelancer’s (ASX:FLN) Share Price Down A Worrying 62%?

Freelancer Limited (ASX:FLN) shareholders will doubtless be very grateful to see the share price up 34% in the last month. But don’t envy holders — looking back over 5 years the returns have been really bad. In that time the share price has delivered a rude shock to holders, who find themselves down 62% after a long stretch. So we’re not so sure if the recent bounce should be celebrated. We’d err towards caution given the long term under-performance.

Check out our latest analysis for Freelancer

Because Freelancer made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn’t make profits, we’d generally expect to see good revenue growth. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over five years, Freelancer grew its revenue at 11% per year. That’s a fairly respectable growth rate. The share price return isn’t so respectable with an annual loss of 18% over the period. That suggests the market is disappointed with the current growth rate. That could lead to an opportunity if the company is going to become profitable sooner rather than later.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

ASX:FLN Income Statement April 25th 2020
ASX:FLN Income Statement April 25th 2020

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Freelancer’s earnings, revenue and cash flow.

A Different Perspective

We regret to report that Freelancer shareholders are down 44% for the year. Unfortunately, that’s worse than the broader market decline of 15%. Having said that, it’s inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 18% per year over five years. We realise that Baron Rothschild has said investors should “buy when there is blood on the streets”, but we caution that investors should first be sure they are buying a high quality business. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that Freelancer is showing 2 warning signs in our investment analysis , you should know about…

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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