The past five years for Freelancer (ASX:FLN) investors has not been profitable

While not a mind-blowing move, it is good to see that the Freelancer Limited (ASX:FLN) share price has gained 23% in the last three months. But don’t envy holders — looking back over 5 years the returns have been really bad. Indeed, the share price is down 52% in the period. So we’re hesitant to put much weight behind the short term increase. Of course, this could be the start of a turnaround.

Now let’s have a look at the company’s fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, Freelancer moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics may better explain the share price move.

Arguably, the revenue drop of 3.1% a year for half a decade suggests that the company can’t grow in the long term. That could explain the weak share price.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

It’s probably worth noting we’ve seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. You can see what analysts are predicting for Freelancer in this interactive graph of future profit estimates.

It’s nice to see that Freelancer shareholders have received a total shareholder return of 36% over the last year. Notably the five-year annualised TSR loss of 9% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It’s always interesting to track share price performance over the longer term. But to understand Freelancer better, we need to consider many other factors. For instance, we’ve identified 3 warning signs for Freelancer (1 doesn’t sit too well with us) that you should be aware of.

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

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.