MongoDB, Inc. (NASDAQ:MDB) shareholders should be happy to see the share price up 11% in the last month. But that doesn’t help the fact that the three year return is less impressive. Truth be told the share price declined 25% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

It’s worthwhile assessing if the company’s economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let’s do just that.

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MongoDB wasn’t profitable in the last twelve months, it is unlikely we’ll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last three years, MongoDB saw its revenue grow by 24% per year, compound. That’s well above most other pre-profit companies. The share price drop of 8% per year over three years would be considered disappointing by many, so you might argue the company is getting little credit for its impressive revenue growth. It seems likely that actual growth fell short of shareholders’ expectations. Still, with high hopes now tempered, now might prove to be an opportunity to buy.

The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

MongoDB is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.

MongoDB shareholders are down 14% for the year, but the market itself is up 13%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.9% over the last half decade. We realise that Baron Rothschild has said investors should “buy when there is blood on the streets”, but we caution that investors should first be sure they are buying a high quality business. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we’ve identified 2 warning signs for MongoDB that you should be aware of.