Should I buy Trustpilot shares after the IPO?

first_img Our 6 ‘Best Buys Now’ Shares See all posts by Edward Sheldon, CFA Enter Your Email Address Image source: Getty Images Like this one… Get the full details on this £5 stock now – while your report is free. FREE REPORT: Why this £5 stock could be set to surge Edward Sheldon owns shares in Alphabet and London Stock Exchange. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Alphabet (C shares). Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Edward Sheldon, CFA | Monday, 29th March, 2021 | More on: TRST Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Should I buy Trustpilot shares after the IPO? Simply click below to discover how you can take advantage of this. One UK stock that’s getting plenty of attention from investors right now is Trustpilot (LSE: TRST). Last week, it listed on the London Stock Exchange via an Initial Public Offering (IPO).Should I buy Trustpilot shares for my own portfolio? Let’s take a look at the investment case.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Trustpilot’s business modelTrustpilot is the owner of trustpilot.com – a consumer website that hosts reviews of businesses worldwide. At the end of 2020, over 529,000 domains had been reviewed on the website, with over 120m reviews by consumers.Trustpilot sees itself as a ‘software-as-a-service’ company (providing software services to companies in return for a regular subscription fee) and operates a ‘freemium‘ business model. This is where businesses get a limited service for free, but can pay for additional services.The subscription offering provides businesses with a range of benefits including access to actionable insights from Trustpilot’s big-data ecosystem and proprietary data analytics software. These services can help businesses raise their profile, build their own trust credentials, and serve their customers more effectively.At the end of 2020, Trustpilot had over 19,500 customers from over 100 countries and territories subscribing for its premium services.What I like about Trustpilot sharesThere are a number of things I like about Trustpilot from an investment perspective. Firstly, the company is easy to understand and its business model is quite straightforward. That’s a plus.Secondly, Trustpilot has registered impressive growth in recent years. For the year ended 31 December 2020, the company recorded revenue of $102m. That compares to revenue of $81.9m and $64.3m in 2019 and 2018 respectively. However, it notes in its prospectus that in future periods, it may not be able to sustain revenue growth at levels consistent with historical periods, or at all. Third, the company should benefit from the continued growth of e-commerce. This is an industry that’s set to get much bigger in the years ahead. This should provide tailwinds for Trustpilot.What I don’t like about Trustpilot sharesHaving said all that, I have some reservations about Trustpilot shares. One is that the company isn’t making money. Last year, it had an operating loss of $9.4m. This is pretty normal for a young, tech start-up but it does add risk. Adjusted EBITDA in 2020 was $6.1m.Another issue is that the stock’s expensive. At the current share price, the company’s market-cap is around £1.1bn. That means the trailing price-to-sales ratio is about 15. That’s relatively high which, again, adds risk.Additionally, I have concerns over barriers to enter in the industry. While I like the fact that Trustpilot has a simple product and business model, this could potentially be a weakness. Is there anything to stop another company such as Alphabet (Google) launching a similar product and stealing market share?Finally, I have some concerns over the company’s reputation. In the past, it’s been criticised for allowing fake reviews to be posted on its website. It’s worth noting that trustpilot.com has 15% bad reviews on its own platform.My viewWeighing everything up, I’m going to keep Trustpilot shares on my watchlist for now. The company looks interesting, but I think there are better growth shares I could buy right now. I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Are you on the lookout for UK growth stocks?If so, get this FREE no-strings report now.While it’s available: you’ll discover what we think is a top growth stock for the decade ahead.And the performance of this company really is stunning.In 2019, it returned £150million to shareholders through buybacks and dividends.We believe its financial position is about as solid as anything we’ve seen.Since 2016, annual revenues increased 31%In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259Operating cash flow is up 47%. (Even its operating margins are rising every year!)Quite simply, we believe it’s a fantastic Foolish growth pick.What’s more, it deserves your attention today.So please don’t wait another moment.last_img

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