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. Importantly, MongoDB, Inc. (NASDAQ:MDB) does carry debt. But is this debt a concern to shareholders?

Why Does Debt Bring Risk?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest 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?

The chart below, which you can click on for greater detail, shows that MongoDB had US$1.14b in debt in April 2024; about the same as the year before. However, it does have US$2.07b in cash offsetting this, leading to net cash of US$929.9m.

How Healthy Is MongoDB's Balance Sheet?

According to the last reported balance sheet, MongoDB had liabilities of US$537.5m due within 12 months, and liabilities of US$1.23b due beyond 12 months. Offsetting these obligations, it had cash of US$2.07b as well as receivables valued at US$266.0m due within 12 months. So it actually has US$574.8m more liquid assets than total liabilities.

This short term liquidity is a sign that MongoDB could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, MongoDB boasts net cash, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. 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$1.8b, which is a gain of 29%, 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?

While MongoDB lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow US$125m. So taking that on face value, and considering the net cash situation, we don't think that the stock is too risky in the near term. Keeping in mind its 29% revenue growth over the last year, we think there's a decent chance the company is on track. We'd see further strong growth as an optimistic indication. 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. For instance, we've identified 3 warning signs for MongoDB that 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.

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