Asana vs Monday.com Stock: For the last several years, businesses around the world have been investing heavily in collaboration and productivity software. These tools allow teams of people to work together on large, complex projects without having to be in the same place at the same time. The onset of the pandemic pushed this trend to new heights, making collaboration software an essential part of work at many companies.
Two of the most promising stocks in this niche are monday.com and Asana. Both of these companies are experiencing massive revenue growth, but they are both also trading substantially below their 2021 highs. Which is best?
monday.com
monday.com (NASDAQ:MNDY) provides a platform for businesses to build out software applications and work management systems. The company’s main appeal is its low-code approach to building software workflows. Using it, businesses can leverage drag-and-drop templates to build the work management software they need.
monday.com reported excellent growth in 2021, with revenues in Q4 rising 91 percent on a year-over-year basis to $95.5 million. This revenue growth was strongly tied to growth in the user base, which expanded by 34 percent.
Net dollar retention also rose to over 120 percent. The company lost $0.26 per share in the fourth quarter. However, this loss was a substantial beat over the $0.51 loss analysts had predicted.
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Price targets for monday.com range widely, but universally show the stock rising in the next 12 months. The MNDY median target price for monday.com is $240, up 67.3 percent from the most recent price of $143.45. The lowest target is $150, a much more modest gain of 4.6 percent.
While monday.com does operate in a competitive market, most of its competitors are similarly young startup companies. The one major tech company that is in direct competition with it is Microsoft through its Microsoft Project Online software. The market for project management software is also continuing to expand. This market is projected to reach $9.81 billion by 2026.
The main risk associated with monday.com stock is its valuation. Despite its obviously impressive growth rates, the stock is priced quite high at a price-to-sales ratio of 20.5. Price-to-book is likewise very high at 9.0.
These concerning metrics, coupled with the fact that the company has not yet achieved profitability, have led to a fair market value of $117 per share according to a discounted cash flow forecast analysis, substantially below analyst targets.
Asana
Asana (NYSE:ASAN) is a software company that provides a collaborative work management platform. The goal of Asana’s software is to enable collaboration between teams on projects of all scales.
In 2021, Asana produced impressive growth numbers that attracted considerable investor attention. In Q4, revenue rose 64 percent to $111.9 million. The customer base grew by 28 percent, including a 125 percent increase in customers spending over $50,000 on Asana software products.
Earnings, however, were much less positive. Asana lost $0.48 per share against a consensus estimate of a $0.43 loss. This marked the first earnings miss of the last fiscal year.
Like monday.com, Asana appears to have massive upside potential over the coming 12 months. The ASAN median analyst price target of $57.83 would see the stock gain 101 percent over its current price of $28.74. The lowest price target is $32, more than 11 percent above the current trading price.
Asana’s competitors consist of several other rapidly growing software companies, including monday.com. Companies that compete directly with both include Wrike and Smartsheet. Given the ability of both companies to grow at such rapid paces, though, it’s clear that there is room in this market for multiple successful platforms.
Asana’s risk factors are also broadly similar to monday.com’s. The company has very high price-to-sales and price-to-book ratios at 14.4 and 26.6, respectively. These metrics suggest that Asana stock is very likely overvalued.
The company is also rapidly burning through its cash reserves. Asana has around $315 million of cash on hand, but its losses are so large that it likely can only support them for two more years without raising more capital. Huge negative free cash flow and a rapid burn rate could be serious risks for Asana, especially if growth begins to slow.
ASAN vs MNDY: Which Is the Better Investment?
As you can see, both of these companies have their strengths and weaknesses. Both monday.com and Asana are high-growth SaaS firms with considerable future potential. Despite their similarities and promising futures, however, monday.com appears to be the better investment of the two.
In large part, this comes down to growth, earnings and cash. While both companies are growing at extremely rapid rates, monday.com has the edge in this key area. The company also posted a very substantial earnings beat in Q4, while Asana appeared to be moving in the wrong direction.
Asana’s rapid burn rate on its cash is also very concerning, as it will either need to increase its cash flows dramatically or raise new capital within the next two years.
Valuation also supports an argument in favor of monday.com. While both companies are probably a bit overvalued, monday.com appears to be a somewhat better proposition. Neither one of these companies is a bargain at its current price, but Asana’s pricing metrics are more out of line than monday.com’s.
Finally, short-term upside potential comes into play. Here, Asana actually holds an edge. If analyst price targets are correct, the stock could double in value over the next year. However, Asana may also be more susceptible to price shocks in the event of negative earnings reports in the coming quarters. After its last earnings report, Asana shares slid by 27 percent. Another bad earnings report later this year could extend this trend.
Taking all of these facts into account, monday.com appears to be the better choice between these two stocks. While Asana does hold the edge in potential upside, monday.com seems more stable. Given that monday.com also has market-beating potential over the next 12 months, the argument in favor of Asana isn’t strong enough to justify the associated risk.
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