Stock Analysis

Upwork Inc.'s (NASDAQ:UPWK) Path To Profitability

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NasdaqGS:UPWK
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With the business potentially at an important milestone, we thought we'd take a closer look at Upwork Inc.'s (NASDAQ:UPWK) future prospects. Upwork Inc. operates an online talent marketplace that enables businesses (clients) to find and work with various independent professionals and agencies (freelancers) in the United States, India, the Philippines, and internationally. The company’s loss has recently broadened since it announced a US$17m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$29m, moving it further away from breakeven. Many investors are wondering about the rate at which Upwork will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.

View our latest analysis for Upwork

Upwork is bordering on breakeven, according to the 5 American Professional Services analysts. They expect the company to post a final loss in 2022, before turning a profit of US$12m in 2023. Therefore, the company is expected to breakeven roughly 2 years from now. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 66% is expected, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
NasdaqGS:UPWK Earnings Per Share Growth February 19th 2021

Given this is a high-level overview, we won’t go into details of Upwork's upcoming projects, however, take into account that by and large a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing we’d like to point out is that The company has managed its capital judiciously, with debt making up 4.5% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of Upwork which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Upwork, take a look at Upwork's company page on Simply Wall St. We've also put together a list of pertinent aspects you should look at:

  1. Valuation: What is Upwork worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Upwork is currently mispriced by the market.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Upwork’s board and the CEO’s background.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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What are the risks and opportunities for Upwork?

Upwork Inc., together with its subsidiaries, operates a work marketplace that connects businesses with various independent professionals and agencies in the United States, India, the Philippines, and internationally.

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Rewards

  • Trading at 64.4% below our estimate of its fair value

  • Revenue is forecast to grow 18.76% per year

Risks

  • Shareholders have been diluted in the past year

  • Currently unprofitable and not forecast to become profitable over the next 3 years

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