Don't Buy Couchbase Before Checking Its Margins!

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.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.

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