Upwork has had an impressive run over the past six months. While the S&P 500 has been flat, the stock has returned 29.6% and now trades at $13.80. This run-up might have investors contemplating their next move.
Is it too late to buy UPWK? Find out in our full research report, it’s free.
Why Does UPWK Stock Spark Debate?
Formed through the 2013 merger of Elance and oDesk, Upwork (NASDAQ: UPWK) is an online platform where businesses and independent professionals connect to get work done.
Two Positive Attributes:
1. Eye-Popping Growth in Customer Spending
Average revenue per customer (ARPC) is a critical metric to track because it measures how much the company earns in transaction fees from each customer. This number also informs us about Upwork’s take rate, which represents its pricing leverage over the ecosystem, or "cut" from each transaction.
Upwork’s ARPC growth has been impressive over the last two years, averaging 8.4%. Its ability to increase monetization while growing its gross services volume demonstrates its platform’s value, as its customers continue to spend more each year. 
2. Increasing Free Cash Flow Margin Juices Financials
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
As you can see below, Upwork’s margin expanded by 21.1 percentage points over the last few years. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability. Upwork’s free cash flow margin for the trailing 12 months was 22%.
One Reason to be Careful:
Change in Gross Services Volume Points to Soft Demand
As a gig economy marketplace, Upwork generates revenue growth by expanding the number of services on its platform (e.g. rides, deliveries, freelance jobs) and raising the commission fee from each service provided.
Over the last two years, Upwork’s gross services volume, a key performance metric for the company, increased by 3% annually to 832,000 in the latest quarter. This growth rate is one of the lowest in the consumer internet sector. If Upwork wants to accelerate growth, it likely needs to engage users more effectively with its existing offerings or innovate with new products. 
Final Judgment
Upwork’s positive characteristics outweigh the negatives, and with its shares beating the market recently, the stock trades at 10.2× forward EV-to-EBITDA (or $13.80 per share). Is now a good time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More Than Upwork
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