Over the past six months, MongoDB has been a great trade, beating the S&P 500 by 6.8%. Its stock price has climbed to $278.16, representing a healthy 23.7% increase. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is now still a good time to buy MDB? Or is this a case of a company fueled by heightened investor enthusiasm? Find out in our full research report, it’s free.
Why Does MongoDB Spark Debate?
Started in 2007 by the team behind Google’s ad platform, DoubleClick, MongoDB offers database-as-a-service that helps companies store large volumes of semi-structured data.
Two Positive Attributes:
1. Billings Surge, Boosting Cash On Hand
Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.
MongoDB’s billings punched in at $511.6 million in Q3, and over the last four quarters, its year-on-year growth averaged 26.1%. This performance was fantastic, indicating robust customer demand. The high level of cash collected from customers also enhances liquidity and provides a solid foundation for future investments and growth. 
2. Outstanding Retention Sets the Stage for Huge Gains
One of the best parts about the software-as-a-service business model (and a reason why they trade at high valuation multiples) is that customers typically spend more on a company’s products and services over time.
MongoDB’s net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 120% in Q3. This means MongoDB would’ve grown its revenue by 19.8% even if it didn’t win any new customers over the last 12 months.
MongoDB has a good net retention rate, proving that customers are satisfied with its software and getting more value from it over time, which is always great to see.
One Reason to be Careful:
Long Payback Periods Delay Returns
The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.
MongoDB’s recent customer acquisition efforts haven’t yielded returns as its CAC payback period was negative this quarter, meaning its sales and marketing investments outpaced its revenue. This inefficiency partly stems from its focus on enterprise clients who require some degree of customization, resulting in long onboarding periods. The complex integrations are a double-edged sword - while MongoDB may not see immediate returns from its sales and marketing investments, it is rewarded with higher switching costs and lifetime value if it can continue meeting its customer’s needs.
Final Judgment
MongoDB has huge potential even though it has some open questions, and with its shares beating the market recently, the stock trades at 9.3× forward price-to-sales (or $278.16 per share). Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More Than MongoDB
The Trump trade may have passed, but rates are still dropping and inflation is still cooling. Opportunities are ripe for those ready to act - and we’re here to help you pick them.
Get started by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.
