Momo Inc (ADR) (NYSE: MOMO), an information technology firm with a market capitalization of $7.4 billion, saw its share price increase by 31.7% over the last month. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Momo’s outlook and value based on its most recent financial data to see if there are any catalysts for a price change.
What Is Momo Worth?
According to our 9 valuation models, Momo seems to be fairly priced in the market at 8.3% above its intrinsic value. This means if you were to buy Momo today, you'd be paying a reasonable price for it. If you believe that the stock is really worth $34.53, then there isn’t much room for the share price to appreciate beyond where it’s currently trading.
| Analysis | Model Fair Value | Upside (Downside) |
|---|---|---|
| 10-yr DCF Revenue Exit | $27.79 | -26.2% |
| 5-yr DCF Revenue Exit | $25.15 | -33.2% |
| Peer Revenue Multiples | $28.08 | -25.4% |
| 10-yr DCF EBITDA Exit | $45.24 | 20.2% |
| 5-yr DCF EBITDA Exit | $44.14 | 17.3% |
| Peer EBITDA Multiples | $36.32 | -3.5% |
| 10-yr DCF Growth Exit | $30.10 | -20.0% |
| 5-yr DCF Growth Exit | $25.84 | -31.3% |
| Peer P/E Multiples | $48.14 | 27.9% |
| Average | $34.53 | -8.3% |
Click on any of the analyses above to view the latest model with real-time data.
Although, there may be an opportunity to buy in the future. This is because Momo’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
How Much Growth Will Momo Generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations.
source: finbox.io data explorer
Momo's revenue growth is expected to average 21.9% over the next five fiscal years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.
Next Steps
Momo's optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At the current price, shareholders may be asking if they should sell? If you believe Momo is currently trading above its value, selling high and buying it again when its price falls towards its real value can be profitable.
I recommend you continue to research Momo to get a more comprehensive view of the company by looking at:
Valuation Metrics: what is Momo's free cash flow yield and how does it compare to its publicly traded peers? This metric measures the amount of free cash flow for each dollar of equity (market capitalization). Analyze the free cash flow yield here.
Efficiency Metrics: return on equity is used to measure the return that a firm generates on the book value of common equity. View Momo's return on equity here.
Forecast Metrics: what is Momo's projected EBITDA margin? Is the company expected to improve its profitability going forward? Analyze the company's projected EBITDA margin here.
Author: Brian Dentino
Expertise: financial technology, analyzing market trends
Brian is a founder at finbox.io, where he's focused on building tools that make it faster and easier for investors to research stock fundamentals. Brian's background is in physics & computer science and previously worked as a software engineer at GE Healthcare. He enjoys applying his expertise in technology to help find market trends that impact investors.
Brian can be reached at [email protected].
As of this writing, Brian did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.
