Small-cap Software company Couchbase is down -1.7% during this morning's trading session, while the S&P 500 moved -0.2%. With last year's reported gross margins at -45.5%, you might be wondering if today's drop is an opportunity to pick up shares of a profitable company at a discount.
Gross margins give insight into the basic economics of the company' product line and its pricing power in the target market, yet it's essential to balance this with a review of Couchbase's operating margins. Operating margins take into account the company's fixed overhead costs, in addition to the cost of revenue used to calculate gross margins
| Date Reported | Revenue ($) | Cost of Revenue ($) | Gross Margins (%) | YoY Growth (%) |
|---|---|---|---|---|
| 2022-01-31 | 123,542,000.0 | 14,781,000.0 | 88.04 | -0.8 |
| 2021-01-31 | 103,285,000.0 | 11,617,000.0 | 88.75 | -1.99 |
| 2020-01-31 | 82,521,000.0 | 7,802,000.0 | 90.55 | n/a |
Couchbase's gross margins are currently in the green, but this might not be the case for long. Since its cost of revenue is growing at a rate of 89.4%, its gross margins have been shrinking -1.4% on average each year.
| Date Reported | Total Revenue ($) | Operating Expenses ($) | Operating Margins (%) | YoY Growth (%) |
|---|---|---|---|---|
| 2022-01-31 | 123,542,000.0 | 179,800,000.0 | -45.54 | -42.18 |
| 2021-01-31 | 103,285,000.0 | 136,365,000.0 | -32.03 | 12.89 |
| 2020-01-31 | 82,521,000.0 | 112,864,000.0 | -36.77 | n/a |
The table above tells us that, on average, Couchbase has not been profitable over the last four years, which should be a warning sign to prospective investors. Indeed, the company's operating margins are sinking at rate of -14.6% despite their strong top line profitability.
