U.S. markets open in 7 hours 31 minutes
  • S&P Futures

    3,827.00
    -12.00 (-0.31%)
     
  • Dow Futures

    31,472.00
    +7.00 (+0.02%)
     
  • Nasdaq Futures

    12,526.75
    -137.00 (-1.08%)
     
  • Russell 2000 Futures

    2,191.70
    +2.00 (+0.09%)
     
  • Crude Oil

    67.22
    +1.13 (+1.71%)
     
  • Gold

    1,702.60
    +4.10 (+0.24%)
     
  • Silver

    25.53
    +0.24 (+0.96%)
     
  • EUR/USD

    1.1896
    -0.0028 (-0.24%)
     
  • 10-Yr Bond

    1.5540
    0.0000 (0.00%)
     
  • Vix

    24.66
    -3.91 (-13.69%)
     
  • GBP/USD

    1.3816
    -0.0012 (-0.09%)
     
  • USD/JPY

    108.4240
    +0.0420 (+0.04%)
     
  • BTC-USD

    50,327.88
    +1,005.61 (+2.04%)
     
  • CMC Crypto 200

    1,020.03
    +76.85 (+8.15%)
     
  • FTSE 100

    6,630.52
    -20.36 (-0.31%)
     
  • Nikkei 225

    28,743.25
    -121.07 (-0.42%)
     

Is MongoDB (NASDAQ:MDB) Using Too Much Debt?

  • Oops!
    Something went wrong.
    Please try again later.
Simply Wall St
·4 min read
  • Oops!
    Something went wrong.
    Please try again later.

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We note that MongoDB, Inc. (NASDAQ:MDB) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. If things get really bad, the lenders can take control of the business. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

Check out our latest analysis for MongoDB

What Is MongoDB's Debt?

The image below, which you can click on for greater detail, shows that at October 2020 MongoDB had debt of US$947.7m, up from US$226.7m in one year. But on the other hand it also has US$966.3m in cash, leading to a US$18.6m net cash position.

debt-equity-history-analysis
debt-equity-history-analysis

How Strong Is MongoDB's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that MongoDB had liabilities of US$271.5m due within 12 months and liabilities of US$1.06b due beyond that. Offsetting these obligations, it had cash of US$966.3m as well as receivables valued at US$91.8m due within 12 months. So its liabilities total US$276.0m more than the combination of its cash and short-term receivables.

This state of affairs indicates that MongoDB's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So while it's hard to imagine that the US$22.3b company is struggling for cash, we still think it's worth monitoring its balance sheet. While it does have liabilities worth noting, MongoDB also has more cash than debt, so we're pretty confident it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine MongoDB's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Over 12 months, MongoDB reported revenue of US$543m, which is a gain of 41%, although it did not report any earnings before interest and tax. With any luck the company will be able to grow its way to profitability.

So How Risky Is MongoDB?

Statistically speaking companies that lose money are riskier than those that make money. And the fact is that over the last twelve months MongoDB lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through US$45m of cash and made a loss of US$254m. While this does make the company a bit risky, it's important to remember it has net cash of US$18.6m. That kitty means the company can keep spending for growth for at least two years, at current rates. MongoDB's revenue growth shone bright over the last year, so it may well be in a position to turn a profit in due course. Pre-profit companies are often risky, but they can also offer great rewards. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. Be aware that MongoDB is showing 5 warning signs in our investment analysis , and 1 of those is a bit concerning...

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.