monday.com has gotten torched over the last six months - since March 2025, its stock price has dropped 32.7% to $187.30 per share. This might have investors contemplating their next move.

Following the drawdown, is now the time to buy MNDY? Find out in our full research report, it’s free.

Why Is monday.com a Good Business?

With its colorful interface of boards, columns, and automation that replaced the chaos of spreadsheets, monday.com (NASDAQ: MNDY) is a cloud-based work operating system that helps teams manage projects, track tasks, and streamline workflows through customizable interfaces.

1. ARR Surges as Recurring Revenue Flows In

While reported revenue for a software company can include low-margin items like implementation fees, annual recurring revenue (ARR) is a sum of the next 12 months of contracted revenue purely from software subscriptions, or the high-margin, predictable revenue streams that make SaaS businesses so valuable.

monday.com’s ARR punched in at $1.20 billion in Q2, and over the last four quarters, its year-on-year growth averaged 30.4%. This performance was fantastic and shows that customers are willing to take multi-year bets on the company’s technology. Its growth also makes monday.com a more predictable business, a tailwind for its valuation as investors typically prefer businesses with recurring revenue.

2. Elite Gross Margin Powers Best-In-Class Business Model

Software is eating the world. It’s one of our favorite business models because once you develop the product, it usually doesn’t cost much to provide it as an ongoing service. These minimal costs can include servers, licenses, and certain personnel.

monday.com’s gross margin is one of the best in the software sector, an output of its asset-lite business model and strong pricing power. It also enables the company to fund large investments in new products and sales during periods of rapid growth to achieve outsized profits at scale. As you can see below, it averaged an elite 89.4% gross margin over the last year. Said differently, roughly $89.42 was left to spend on selling, marketing, and R&D for every $100 in revenue.

3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

monday.com has shown terrific cash profitability, driven by its lucrative business model and cost-effective customer acquisition strategy that enable it to stay ahead of the competition through investments in new products rather than sales and marketing. The company’s free cash flow margin was among the best in the software sector, averaging 29.9% over the last year. The divergence from its underwhelming operating margin stems from the add-back of non-cash charges like depreciation and stock-based compensation. GAAP operating profit expenses these line items, but free cash flow does not.

Final Judgment

These are just a few reasons why we're bullish on monday.com. After the recent drawdown, the stock trades at 7.3× forward price-to-sales (or $187.30 per share). Is now a good time to buy? See for yourself in our in-depth research report, it’s free.

Stocks We Like Even More Than monday.com

When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.

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