New York City-based MongoDB Inc. (MDB - Get Rating) is a premier modern, general-purpose database platform built to unleash the potential of software and data for developers and the applications they create. The recent tech selloff owing to looming interest rate hikes has caused the stock to slump in price. The company’s shares have dipped nearly 37.7% over the past three months and 25.9% over the past month to close yesterday’s trading session at $316.49.

In addition, the tech industry’s strong growth prospects are fueling intense competition among existing and new players. This has led the shares of various industry players, including MDB, to hit valuations that are not justified by their existing or anticipated financial performance.

In terms of forward Price/Book, the stock is currently trading at 34.49x, which is 714.3% higher than the 4.24x industry average. Also, its 17.58x forward EV/Sales multiple is 470.4% higher than the 3.08x industry average. Furthermore,  MDB’s 18.07x forward Price/Sales  is 488.5% higher than the 3.07x industry average.

Click here to check out our Software Industry Report for 2022

Here is what could shape MDB’s performance in the near term:

Negative bottom line

MDB’s revenue increased 55.8% year-over-year to $266.49 million for the fourth quarter, ended Jan. 31, 2022. Its operating loss grew 32.4% from the prior-year quarter to $78.62 million. And the company’s net loss surged 11.4% from its year-ago value to $84.45 million, while its loss per share amounted to $1.26.

Poor Profitability

MDB’s 0.45% trailing-12-months asset turnover ratio is 29.1% lower than the 0.64% industry average. Also, its ROA, ROC, and net income margin are negative 12.5%, 12.2 and 35.1%, respectively. And  its $6.98 million trailing-12-month cash from operations is 92.6% lower than the $94.63 million industry average.

POWR Ratings Reflect Uncertainty

MDB has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. The POWR ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. MDB has a D grade for Value which is justified given the stock’s higher-than-industry valuations.

Among the 164 stocks in the F-rated Software – Application industry, MDB is ranked #115.

Beyond what I have stated above, you can view MDB ratings for Growth, Stability, Sentiment, Quality, and Momentum here.

Click here to check out our Software Industry Report for 2022

Bottom Line

Though the company reported stable revenue growth, its widening losses and negative profit margins should continue to affect its price performance. Analysts expect the company’s EPS to remain negative in the current and next quarters. In addition, the stock is currently trading below its 50-day and 200-day moving averages of $396.85 and $427.78, respectively, indicating bearish sentiment. So, we think the stock is best avoided now.

How Does MongoDB Inc. (MDB) Stack Up Against its Peers?

While MDB has an overall D rating, one might want to consider its industry peers, Commvault Systems Inc. (CVLT - Get Rating), SS&C Technologies Holdings Inc. (SSNC - Get Rating), and Rimini Street Inc. (RMNI - Get Rating), which have an overall A (Strong Buy) rating.

MDB shares were trading at $307.98 per share on Monday morning, down $8.51 (-2.69%). Year-to-date, MDB has declined -41.82%, versus a -10.75% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...

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