Israeli online freelancer platform Fiverr (NYSE:FVRR) is the definition of a mixed bag. The company has some key strengths that are balanced out by some equally important weaknesses. I typically find it’s best to avoid companies like this unless their shares are trading at a very attractive valuation. In the case of FVRR stock, that is definitely not the case.

The company went public in June 2019 at $21 a share. FVRR stock shot up 90% on its first day of trading. However, it wasn’t long before shares reversed. In March 2020, they once again dipped below their IPO price, hitting a low of $20.42. Less than a year later, they topped out at $336 for a gain of 1,545%.

It’s not surprising that an online marketplace that connects businesses with on-demand freelancers was one of the pandemic’s biggest winners. Layoffs and lockdowns helped accelerate the gig economy, as many people found themselves looking for freelance work they could do from the safety of their homes. At the same time, businesses increased their spending on freelancers.

As the world began to reopen, though, investors abandoned pandemic favorites like Zoom Video Communications (NASDAQ:ZM), Peloton Interactive (NASDAQ:PTON) and Fiverr.

Today, with FVRR stock trading below $190, some investors may be questioning whether shares are a bargain. Let’s take a closer look at the company’s strengths and weaknesses to determine whether this is the case.

Fiverr’s Strengths

Fiverr has a fairly strong brand, with numerous sites ranking it as one of the best platforms for freelancers to find work.

Between June 30, 2020, and June 30, 2021, the company grew its number of active buyers by 43% to 4 million. And the amount of money spent per buyer increased 23% during that period to $226.

The company has also been growing revenue rapidly. Sales jumped 42% in 2019 and 77% in 2020. And they are estimated to increase another 52% this year. Additionally, Fiverr posted its first annual profit since going public last year, with adjusted earnings per share of 29 cents, compared to an adjusted loss of 58 cents in 2019.

On the company’s most recent earnings call, held on Aug. 5, CEO  Micha Kaufman stated: “Looking at the last two years, we have effectively doubled our active buyer base, tripled our revenue base, and achieved a nearly 30% positive swing in EBITDA margin.”

Kaufman is optimistic about the future despite the pandemic winding down. He expects that, by 2030, close to half of American workers will be independent contractors. According to a recent survey, about 36% of the U.S. workforce, or 59 million Americans, performed freelance work in the past year.

Kaufman is far from alone in predicting we will see the gig economy continue to expand. And the more freelancers there are seeking work, the more potential for Fiverr to grow its business.

Now let’s look at the company’s key weaknesses, of which there are three.

Fiverr’s Weaknesses

First, while the company’s brand is strong, I wouldn’t say it’s tremendously powerful. I don’t hear any of my friends, relatives or acquaintances discussing their Fiverr profiles or talking about buying services on the website. And when you consider that some 59 million Americans have freelanced in the past year, Fiverr’s 4 million users amounts to less than 7% of that.

Second, the barriers to entry in the online freelancer marketplace aren’t high. Fiverr already competes with Upwork (NASDAQ:UPWK), 99designs, FlexJobs and Guru, to name a few. Existing competitors or new entrants could easily take market share away from Fiverr.

Third, growth is unlikely to remain at its pandemic heights with people spending less time at home online.

FVRR stock sold off sharply in early August after the company’s outlook for the third quarter and the full year came in well below expectations. Management provided Q3 revenue guidance of $68 million to $72 million, versus analysts’ average outlook of $80.2 million. And they predicted full-year sales would be $280 million to $288 million, versus the average outlook of $308 million.

Kaufman cited “reduced online activity translat[ing] into more modest new customer cohorts and less activity for those who are taking vacation” as the reason for the lower guidance.

While revenue is expected to grow 52% this year, analysts forecast it will slow to 31% in 2022. Furthermore, they predict the company will report adjusted earnings of just 5 cents for 2021, down from 29 cents in 2020.

The Bottom Line on FVRR Stock

Given the headwinds facing Fiverr, it’s not surprising FVRR stock has retreated 18% since the company announced its Q2 results. Yet, shares still trade for about 24 times the sales over the past 12 months.

That’s an extremely high valuation for a company that is forecast to see slowing growth in a sector with numerous competitors and low barriers to entry. I recommend investors avoid or sell FVRR stock.

On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015.  Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.