WDAY: MongoDB vs. Workday: Which Cloud Stock is a Better Buy?

MongoDB, Inc. (MDB) and Workday, Inc. (WDAY) are two prominent cloud applications and database operators that provide enterprise cloud solutions worldwide. MDB offers MongoDB Enterprise Advanced and MongoDB Atlas solutions to enterprises. It also provides professional services, such as consulting and training. WDAY delivers financial management applications, cloud applications, and human capital management applications to clients and enterprises.

As digital transformation and the adoption of permanent hybrid work culture increases, business organizations and individuals are becoming more dependent on cloud collaboration platforms like MDB and WDAY to communicate and process large volumes of business data daily as well as to reduce their operational costs and enhance scalability. With worldwide spending on IT infrastructure and public cloud growing quickly, we think these companies are in an excellent position to benefit and capitalize on a big market opportunity over the long run.

While MDB gained 185% over the past year, WDAY returned 118.8%. In terms of past three-month performance, WDAY is the clear winner with 3.2% gains versus MDB’s negative returns. But which of these stocks is a better pick now? Let’s find out.

Click here to check out our Software Industry Report for 2021

Latest Movements

Last month, Google Cloud and MDB entered an expanded five-year partnership to offer deeper integration of Google Cloud products with MDB’s global cloud database, MongoDB Atlas. The partnership should drive greater customer engagement and enhance MDB’s customer experience because it offers a “pay as you go” service on the Google Cloud Marketplace. MDB also recently teamed up with Tencent Cloud to allow its customers to adopt and use MongoDB-as-a-Service across Tencent’s global cloud infrastructure.

This month, WDAY completed the acquisition of Peakon Aps, an employee success platform that converts feedback into insights. With Peakon now under WDAY, the company should be able to offer tools and insights to customers and build a better business.

Last month, Zumiez selected WDAY’s financial management services to accelerate its digital finance transformation and manage a changing business landscape. As WDAY continues to see retail leaders selecting its platforms for operating efficiencies, the company is well positioned to achieve top-line growth.

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Recent Financial Results

In the fourth quarter, ended January 31, 2021, MDB’s total revenue grew 38% year-over-year to $171 million. Its gross profit was $120.01 million, representing a 35.3% increase from its year-ago value. However, the company reported a net loss of $75.8 million. Its operational loss was $59.4 million, compared to $40.9 million in the year-ago period.

WDAY’s revenue increased 15.9% year-over-year to $1.13 billion in the fiscal fourth quarter ended January 31, 2021. Its subscription revenue rose 19.8% from the year-ago value to $1.01 billion. Also, the company’s net cash provided by operating activities grew 86.4% year-over-year to $553.75 million over this period.

Past and Expected Financial Performance

MDB’s revenue and total assets have grown at a CAGR of 52.6% and 48.2%, respectively, over the past three years.

Analysts expect the company’s revenue to increase 29% in the current year and 28.2% next year. MDB’s EPS is expected to grow 34.5% next year.

In comparison, the CAGR of WDAY’s revenue and total assets have been 26.3% and 20.8%, respectively, over the past three years.

WDAY’s revenue is expected to increase 15.6% in fiscal 2022 and 18.1% in 2023. The Street expects the company’s EPS to increase 23.5% next year.

Profitability

WDAY’s trailing-12-month revenue is more than seven times MDB’s. In fact, WDAY is more profitable, with a gross profit margin of 72.7% versus MDB’s 70%.

Also, WDAY’s levered free cash flow margin of 31.8% compares favorably with MDB’s 23.9%.

Valuation

In terms of trailing-12-month price/sales, MDB is currently trading at 30.11x, 120.1% higher than WDAY, which is currently trading at 13.68x. Also, its trailing-12-month ev/sales of 32.75x is 127.9% higher than MDB’s 14.37x.

So, WDAY is the more affordable stock.

POWR Ratings

WDAY has an overall B rating, which equates to a Buy in our proprietary POWR Ratings system. However, MDB has an overall D rating, which translates to Sell. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

Both WDAY and MDB have a Momentum grade of C, which is consistent with their price returns over the past three months.

In terms of Growth Grade, WDAY has an A, which is consistent with its earnings and revenue growth. In contrast, MDB has a Growth Grade of D.

Also, WDAY has a Sentiment Grade of B, which is in sync with analysts’ expectations regarding its earnings and revenue growth. In comparison, MDB has a Sentiment Grade of D.

Of the 114 stocks in the D-rated Software – Application industry, WDAY is ranked #24 while MDB is ranked #103.

In addition to what we’ve stated above, our POWR Ratings system also rates both WDAY and MDB for Quality, Stability, and Value. Get the ratings for WDAY here. Also, click here to see the additional POWR Ratings for MDB.

The Winner

While both WDAY and MDB are good long-term investments considering their market dominance and the accelerating adoption of their cloud-based platforms, WDAY appears to be a better buy based on the factors discussed here. Even though MDB has been making significant progress on its modern application data platform, we believe WDAY’s superior financials, higher profitability, and relative undervaluation make it a better investment option.

Our research shows that the odds of success increase if you bet on stocks with an Overall POWR Rating of Buy or Strong Buy. If you’re looking for other top-rated stocks in the Software – Application industry, click here.

Click here to check out our Software Industry Report for 2021

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WDAY shares were trading at $254.19 per share on Friday afternoon, up $5.05 (+2.03%). Year-to-date, WDAY has gained 6.08%, versus a 4.60% rise in the benchmark S&P 500 index during the same period.

About the Author: Imon Ghosh

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...