Shares of MongoDB (MDB) have been strong performers lately, with the stock up 54.9% over the past month. The stock hit a new 52-week high of $398.89 in the previous session. MongoDB has gained 96.9% since the start of the year compared to the 33.6% move for the Zacks Computer and Technology sector and the 43.8% return for the Zacks Internet - Software industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on June 1, 2023, MongoDB reported EPS of $0.56 versus consensus estimate of $0.19 while it beat the consensus revenue estimate by 6.35%.
For the current fiscal year, MongoDB is expected to post earnings of $1.45 per share on $1.53 billion in revenues. This represents a 79.01% change in EPS on a 19.38% change in revenues. For the next fiscal year, the company is expected to earn $1.97 per share on $1.86 billion in revenues. This represents a year-over-year change of 35.95% and 21.18%, respectively.
MongoDB may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
MongoDB has a Value Score of F. The stock's Growth and Momentum Scores are A and A, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 267.8X current fiscal year EPS estimates, which is a premium to the peer industry average of 42.7X. On a trailing cash flow basis, the stock currently trades at 5X versus its peer group's average of 17.7X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, MongoDB currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if MongoDB meets the list of requirements. Thus, it seems as though MongoDB shares could have a bit more room to run in the near term.
How Does MDB Stack Up to the Competition?
Shares of MDB have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Rimini Street, Inc. (RMNI). RMNI has a Zacks Rank of # 2 (Buy) and a Value Score of A, a Growth Score of A, and a Momentum Score of B.
Earnings were strong last quarter. Rimini Street, Inc. beat our consensus estimate by 22.22%, and for the current fiscal year, RMNI is expected to post earnings of $0.47 per share on revenue of $425.5 million.
Shares of Rimini Street, Inc. have gained 9.5% over the past month, and currently trade at a forward P/E of 9.46X and a P/CF of 10.4X.
The Internet - Software industry is in the top 43% of all the industries we have in our universe, so it looks like there are some nice tailwinds for MDB and RMNI, even beyond their own solid fundamental situation.
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