Is Momo Inc. (NASDAQ:MOMO) Potentially Underrated?

Building up an investment case requires looking at a stock holistically. Today I’ve chosen to put the spotlight on Momo Inc. (NASDAQ:MOMO) due to its excellent fundamentals in more than one area. MOMO is a financially-sound company with a strong track record and a excellent future outlook. Below is a brief commentary on these key aspects. For those interested in understanding where the figures come from and want to see the analysis, read the full report on Momo here.

Good value with reasonable growth potential

MOMO’s cash-generating ability is outstanding, with analysts expecting its operating cash flows to flourish by 62% in the upcoming year. This underlies the notable 25% return on equity over the next few years leading up to 2022. MOMO delivered a satisfying double-digit returns of 25% in the most recent year Unsurprisingly, MOMO surpassed the Interactive Media and Services industry return of 15%, which gives us more confidence of the company’s capacity to drive earnings going forward.

NasdaqGS:MOMO Past and Future Earnings, April 15th 2019
NasdaqGS:MOMO Past and Future Earnings, April 15th 2019

MOMO’s ability to maintain an adequate level of cash to meet upcoming liabilities is a good sign for its financial health. This implies that MOMO manages its cash and cost levels well, which is a key determinant of the company’s health. MOMO’s has produced operating cash levels of 0.68x total debt over the past year, which implies that MOMO’s management has put its borrowings into good use by generating enough cash to cover a sufficient portion of borrowings.

NasdaqGS:MOMO Historical Debt, April 15th 2019
NasdaqGS:MOMO Historical Debt, April 15th 2019

Next Steps:

For Momo, I’ve compiled three relevant aspects you should look at:

  1. Valuation: What is MOMO worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether MOMO is currently mispriced by the market.
  2. Dividend Income vs Capital Gains: Does MOMO return gains to shareholders through reinvesting in itself and growing earnings, or redistribute a decent portion of earnings as dividends? Our historical dividend yield visualization quickly tells you what your can expect from MOMO as an investment.
  3. Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of MOMO? Explore our interactive list of stocks with large potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.