Which collaboration software company should be in your portfolio? Discover what sets Atlassian and Monday.com apart.
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 cloud-based availability from anywhere, a touch of process automation and a touch of artificial intelligence (AI), and you have a productivity-enhancing recipe.
Several tech titans include collaboration software in their vast product portfolios, but a few companies focus exclusively on this specific market. monday.com (MNDY -2.28%) And Atlassian (TEAM 0.21%) are two leaders in this field. Both stocks have soared over the past two years, but along different paths.
Which collaboration software specialist is the better buy today? Let’s see.
Let’s explore Atlassian’s market leadership
Atlassian is the larger and more experienced option. The company was founded in 2002 and entered the US stock market in 2015.
With trailing revenues of $5.6 billion and a market cap of $70 billion, 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 running. Atlassian’s trailing sales have doubled in three years, while free cash flows have increased 78%. The company focuses on serving enterprise customers with complex needs and deep pockets. The recently launched Rovo tool was Atlassian’s first pure AI solution, followed by more and more AI-powered features popping up across the company’s collaboration portfolio.
The stock chart is a bit of a mystery. Atlassian continues to deliver robust growth at both the top and bottom end, consistently exceeding analyst expectations. Still, stocks have not yet recovered from the growth stock panic that started with the inflation crisis three years ago. So Atlassian shares are up 59% in three months, but remain 43% below their 2021 peak.
You might have expected the company’s rising earnings and rocky price chart to result in a modest valuation, but that’s not what I see. Amid this volatile chart action, the stubs look expensive at 64 times forward earnings and 15 times sales.
Monday.com is a rising star
Monday.com is younger and faster. This company is 12 years old and has only three years of stock market experience.
The products bear a striking similarity to Atlassian’s portfolio, but Monday.com prefers to sell an integrated bundle of Work OS solutions.
The shorter experience currently translates into a smaller company. Monday.com’s annual revenue stops at $907 million and its shares are worth a total of $15 billion.
But there’s no doubting the appeal of the Monday.com Work OS suite. Revenues are up 245% in three years and free cash flows have risen from about breakeven to $279 million. Monday.com may be playing catch-up to Atlassian’s larger software empire, but the smaller company is making big progress.
This stock chart is just as rocky as Atlassian’s. The two stocks have followed similar trends over the years, although Monday.com’s share price performance has been more positive in 2024.
And if you thought Atlassian stock looked pricey, I suggest you grab some smelling salt before looking at Monday.com’s valuation. Its price-to-sales ratio is similar to Atlassian’s, stopping at 16.9, but the stock also trades for 81 times forward earnings estimates. The price premium is supported by faster growth rates. Monday.com is simply a more extreme example of the high prices often associated with high-octane growth stocks.
Which collaboration software should you choose?
So it’s an established market leader versus a younger newcomer. Both companies are growing like wildfire, and the growth rates are reflected in rich stock valuations. Fans of each stock might call them undervalued, as the shares have fallen significantly from their multi-year highs. However, that is quite a task; it seems more reasonable to call the earlier peaks ‘too expensive’.
It is difficult to pick an outright winner in this match. It’s largely a matter of taste, whether you’d rather pay a little extra for the smaller and hungry growth phenomenon or prefer Atlassian’s more mature growth story. Twist my arm and maybe I’d grab some Atlassian stock before building a position on Monday.com, but it’s hard to go wrong with either choice.
These two stocks are solid ways to capitalize on the growing demand for advanced digital collaboration tools. Make sure you are comfortable with lofty, growth-supported valuations before taking this opportunity.
Anders Bylund has no position in any of the stocks mentioned. The Motley Fool holds and recommends positions in Atlassian and Monday.com. The Motley Fool has a disclosure policy.
