Database specialist MongoDB (NASDAQ:MDB) has been a great investment in recent years. Since 2018 the stock is up over 1,000%, crushing the 65% return of the broader market. Even so, digital transformation is driving the need for a more modern database platform, and MongoDB has barely scratched the surface of that market opportunity.

Here's why this stock could still offer you a return of 100% -- or more.

Software developer building a modern application.

Image source: Getty Images

MongoDB's market opportunity

Why are databases important? Every application generates data. That means every application needs a place to store, organize, and retrieve information. In the 1970s, relational databases were developed to meet this need, and at the time they worked well. Most data was highly structured, meaning it fit neatly into tables, and that's exactly how relational databases work.

As you might imagine, things are different today. Between 80% and 90% of data generated by modern applications is unstructured. This includes things like text messages, streaming content, and social media posts. It's possible to force this data into a relational scheme, but it's a time-consuming and costly endeavor.

MongoDB solves this problem. Its document database platform allows clients to store unstructured data. It also scales more easily and offers better performance than relational databases. In other words, MongoDB helps developers build applications more quickly and cost-efficiently.

That's a big deal. Software is critical to virtually every industry, and rapid development times can help a company stay ahead of the competition. As a result, the International Data Corp. (IDC) currently values the database market at a whopping $73 billion.

Software developer analyzing data from a modern application.

Image source: Getty Images

MongoDB's competitive edge

Of course, relational databases are still widely used. In fact, Oracle runs the most popular database in the world, and it uses a relational model. But MongoDB has still gained traction with clients. In fact, it currently ranks as the most popular non-relational database, and the fifth-most-popular database overall, according to DB-Engines.

The company owes most of that success to its developer-friendly approach. Everyone wants their job to be easier, and MongoDB helps developers work faster. That, in turn, creates cost savings for clients. In fact, some customers have cut expenses by 70% when migrating from Oracle to MongoDB.

To add to that, the company also has another key advantage: It's cloud-agnostic. Tech titans like Amazon and Microsoft have attempted to build non-relational databases, but none of them have caught on like MongoDB. That's because many companies want a solution that's not tied to one public cloud. MongoDB provides that multi-cloud flexibility with its database-as-a-service offering, MongoDB Atlas.

In short, the company's developer-friendly, cloud-agnostic approach has helped it win clients across industries. And that has translated into strong top-line growth.

Metric

Q1 2019 (TTM)

Q1 2022 (TTM)

CAGR

Customers

14,200

26,800

24%

Revenue

$306.3 million

$641.7 million

28%

Data source: MongoDB SEC filings, Ycharts. TTM = trailing-12-months. CAGR = compound annual growth rate. Note: Q1 2022 ended April 30, 2021.

Investors should note that MongoDB is currently burning cash, and management doesn't expect that to change this year. However, given the size of the addressable market, it makes sense to invest aggressively in growth. And that's exactly what the company is doing.

MongoDB's future

MongoDB Atlas is a core part of management's growth strategy. This product is built in the cloud, so clients avoid the complexity of managing the database and its underlying infrastructure. That means developers can spend more time doing what they do best: building applications.

Not surprisingly, Atlas has seen strong adoption. Since launching in 2016, the platform has drawn over 25,300 customers, and Atlas revenue skyrocketed 73% during Q1. I expect that momentum to continue in the coming years as more enterprises look to boost productivity, cut costs, and harness the full power of their data.

Looking ahead, IDC believes the database market will jump from $73 billion in 2021 to $119 billion by 2025, leaving MongoDB with plenty of room to grow its business. That's why I think this growth stock could double (or more) over the next five years.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning 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 richer.