At US$7.40, Is Hello Group Inc. (NASDAQ:MOMO) Worth Looking At Closely?

Hello Group Inc. (NASDAQ:MOMO), is not the largest company out there, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$10.82 and falling to the lows of US$6.84. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Hello Group's current trading price of US$7.40 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Hello Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Hello Group

What's The Opportunity In Hello Group?

Great news for investors – Hello Group is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Hello Group’s ratio of 5.66x is below its peer average of 16.81x, which indicates the stock is trading at a lower price compared to the Interactive Media and Services industry. Hello Group’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What kind of growth will Hello Group 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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a relatively muted profit growth of 5.4% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Hello Group, at least in the short term.

What This Means For You

Are you a shareholder? Even though growth is relatively muted, since MOMO is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on MOMO for a while, now might be the time to make a leap. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy MOMO. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

If you want to dive deeper into Hello Group, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 1 warning sign for Hello Group you should know about.

If you are no longer interested in Hello Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.