Upwork trades at $16.10 and has moved in lockstep with the market. Its shares have returned 18.9% over the last six months while the S&P 500 has gained 16%.
Is UPWK a buy right now? Find out in our full research report, it’s free.
Why Does Upwork 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 8.9%. Although its gross services volume were flat during this time, the company’s ability to successfully increase monetization demonstrates its platform’s value for existing customers. 
2. Increasing Free Cash Flow Margin Juices Financials
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, Upwork’s margin expanded by 31.3 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 29.6%.
One Reason to be Careful:
Gross Services Volume Hit a Plateau
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.
Upwork struggled with new customer acquisition over the last two years as its gross services volume were flat at 796,000. This performance isn't ideal because internet usage is secular, meaning there are typically unaddressed market opportunities. If Upwork wants to accelerate growth, it likely needs to enhance the appeal of its current offerings or innovate with new products. 
Final Judgment
Upwork has huge potential even though it has some open questions, but at $16.10 per share (or 11× forward EV/EBITDA), is now the time to initiate a position? See for yourself in our full research report, it’s free.
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