Does MongoDB (NASDAQ:MDB) Have A Healthy Balance Sheet?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. 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 Dangerous?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

See our latest analysis for MongoDB

How Much Debt Does MongoDB Carry?

As you can see below, MongoDB had US$1.14b of debt, at July 2022, which is about the same as the year before. You can click the chart for greater detail. But on the other hand it also has US$1.80b in cash, leading to a US$657.4m net cash position.

How Strong Is MongoDB's Balance Sheet?

The latest balance sheet data shows that MongoDB had liabilities of US$524.9m due within a year, and liabilities of US$1.26b falling due after that. Offsetting this, it had US$1.80b in cash and US$213.3m in receivables that were due within 12 months. So it can boast US$225.4m more liquid assets than total liabilities.

Having regard to MongoDB's size, it seems that its liquid assets are well balanced with its total liabilities. So it's very unlikely that the US$12.0b company is short on cash, but still worth keeping an eye on the balance sheet. Simply put, the fact that MongoDB has more cash than debt is arguably a good indication that it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if MongoDB can strengthen its balance sheet over time. 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$1.1b, which is a gain of 54%, although it did not report any earnings before interest and tax. Shareholders probably have their fingers crossed that it can grow its way to profits.

So How Risky Is MongoDB?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And we do note that MongoDB had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through US$27m of cash and made a loss of US$362m. But the saving grace is the US$657.4m on the balance sheet. That kitty means the company can keep spending for growth for at least two years, at current rates. With very solid revenue growth in the last year, MongoDB may be on a path to profitability. 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. However, not all investment risk resides within the balance sheet - far from it. Case in point: We've spotted 4 warning signs for MongoDB you should be aware of.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.