Once in a while, a stock comes along that can change your life. Salesforce.com was a small tech value in the early 2000s, but has grown into a $200 billion giant. A $10,000 investment when it first went public would be worth around $800,000 today.
Salesforce is unlikely to appreciate another 80 times in the future, but another enterprise software company monday.com (NASDAQ: MNDY) might be able to follow in his footsteps. There’s a lot to like about this fast-growing company, and it’s still small enough to generate life-changing returns in the long run. Here’s why.
Reinvent the way people work
Many companies still operate with people from different departments using tons of different software tools and programs. Therefore, collaboration between teams often involves a lot of inefficiency as they struggle to bring their systems together and communicate effectively.
Monday.com addresses this problem by offering a software-as-a-service (SaaS) platform that allows customers to build a custom operating system for their workplace. On Monday.com, employers can create workflows and project management systems specifically designed for their needs, automate simple tasks, and integrate data from other programs. A simple to use interface with little to no code means users can drag and drop, use templates and leverage the platform with minimal technical experience.
It is a cloud-based platform, so it can scale within an organization. Ultimately, Monday.com tries to make working systems simple and flexible by becoming the “command center” of a business.
Grow like wildfire
Just look at its growth to see proof that its products are resonating with businesses. Monday.com launched in 2014 and hit $11 million in annual revenue in 2017. That figure jumped to $161 million in 2020, and management expects revenue of around $300 million for the year. 2021, i.e. growth of 86%.
Its ability to acquire customers and encourage them to spend more over time fuels its strong revenue growth. Monday.com offers a free tier of its platform for up to two users. This is ideal for an IT employee who is curious about the product and wants to experiment with it. Monday.com’s paid tiers then increase in price as more features are unlocked, allowing the software to spread across a business and become more and more ‘critical’. For customers with 10 or more users, Monday.com reported a net dollar retention rate of 130% in the last quarter.
This can also be seen in the rapid growth of Monday.com’s business customers – the number of businesses contributing $50,000 or more in annual recurring revenue is 613 in the third quarter, a 231% year-over-year increase. the other.
Not a bargain but small enough to win big
The market has held SaaS stocks in high esteem for years, and Monday.com’s rapid revenue growth earned it a sky-high valuation when it went public in June, peaking at a price-to-sales ratio above 60. C It’s hard to achieve truly spectacular returns when a stock is so expensive, because so much future success is already priced into the stock price.
This is why the market-wide sell-off among many tech stocks presents an opportunity for long-term investors. Monday.com’s P/S ratio fell below 30. To be clear, it’s still an expensive stock, but at its cheapest valuation since the IPO, I think fundamentals this solid make it a stock worth slowly building a position. The market cap is just under $9 billion, and comparing it to major SaaS providers like Salesforce, it’s clear that the long-term upside is substantial as Monday.com executes its growth initiatives over the course of the year. next decade.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.