Collaboration software is a hot ticket these days. From project management platforms to team-based communication tools, digital collaboration systems can help employees make the most of their talents and resources. Add in cloud-based availability from anywhere, a touch of process automation, and a dash of artificial intelligence (AI) assistance, and you have a productivity-boosting recipe.
Several tech titans include collaboration software in their enormous product portfolios, but a few companies focus exclusively on this specific market. Monday.com (MNDY +10.46%) and Atlassian (TEAM +29.10%) are two leaders in this space. Both stocks have soared over the last two years, but along different trajectories.
Which collaboration software specialist is the better buy today? Let's take a look.
NASDAQ: TEAM
Key Data Points
Let's explore Atlassian's market leadership
Atlassian is the larger and more experienced option. The company was founded in 2002 and joined the American stock market in 2015.
With trailing sales of $5.6 billion and a $70 billion market cap, I'm talking about an established giant. The Jira project management system, Confluence knowledge base, and Trello process visualization tool are among the most popular solutions in each field.
And the business is rocking. Atlassian's trailing sales have doubled in three years while free cash flows rose by 78%. The company focuses on serving enterprise-grade customers with complex needs and deep pockets. The recently introduced Rovo tool was Atlassian's first pure AI solution, to be followed by more and more AI-powered features showing up across the company's collaboration portfolio.
The stock chart is a bit of an enigma. Atlassian keeps delivering robust growth across the top and bottom lines, consistently beating analyst expectations. Yet, the stock hasn't recovered from the growth-stock panic that started with the inflation crisis three years ago. So Atlassian's stock has gained 59% in three months but remains 43% below its 2021 peak.
Maybe you expected the company's surging profits and rocky price chart to result in a modest valuation, but that's not what I see. Amid this volatile charting action, the stubs look expensive at 64 times forward earnings and 15 times sales.
NASDAQ: MNDY
Key Data Points
Monday.com is a rising star
Monday.com is younger and faster. This company is 12 years old with just three years of stock market experience.
Its products bear a striking resemblance to Atlassian's portfolio, but Monday.com prefers to sell an integrated bundle of Work OS solutions.
The shorter experience translates into a smaller business at the moment. Monday.com's annual sales stop at $907 million and the stock is worth a total of $15 billion.
But there is no doubt about the Monday.com Work OS suite's customer appeal. Revenues are up by 245% in three years and free cash flows soared from roughly breakeven to $279 million. Monday.com may be playing catch-up to Atlassian's larger software empire, but the smaller company is making great strides.
This stock chart is just as rocky as Atlassian's. The two stocks have followed similar trends over the years, though Monday.com's price trend has been more positive in 2024.
And if you thought Atlassian's stock looked pricey, I suggest grabbing some smelling salt before looking at Monday.com's valuation. Its price-to-sales ratio is comparable to Atlassian's, stopping at 16.9, but the stock also trades for 81 times forward earnings estimates. The price premium is supported by quicker growth rates -- Monday.com is simply a more extreme example of the lofty prices that often are attached to high-octane growth stocks.
Which collaboration software stock should you choose?
So it's one established industry leader versus a younger upstart. Both businesses are growing like wildfire, and the growth rates are reflected in rich stock valuations. Fans of each stock might call them undervalued since the stocks are down significantly from their multi-year highs. That's a stretch, though -- it seems more reasonable to call the earlier peaks "overpriced."
It's hard to pick an outright winner in this duel. It's largely a matter of taste, whether you prefer paying a bit extra for the smaller and hungrier growth phenom or prefer the more mature growth story of Atlassian. Twist my arm, and maybe I'd grab some Atlassian shares before building a Monday.com position, but it's hard to go wrong with either choice.
These two stocks are solid methods for taking advantage of the booming demand for advanced digital collaboration tools. Just make sure you're comfortable with lofty, growth-supported valuations before stepping into this opportunity.
