Is Match Group, Inc. (NASDAQ:MTCH) Undervalued After Accounting For Its Future Growth?

Match Group, Inc. (NASDAQ:MTCH) is considered a high-growth stock, but its last closing price of $55.35 left some investors wondering if this high future earnings potential can be rationalized by its current price tag. Let’s take a look at some key metrics to determine whether there’s any value here for current and potential future investors.

View our latest analysis for Match Group

What are the future expectations?

Investors in Match Group have been patiently waiting for the uptick in earnings. If you believe the analysts covering the stock then the following year will be very interesting. The consensus forecast from 19 analysts is certainly positive with earnings forecasted to rise significantly from today’s level of $1.727 to $2.338 over the next three years. On average, this leads to a growth rate of 15% each year, which illustrates an optimistic outlook in the near term.

Can MTCH’s share price be justified by its earnings growth?

Match Group is trading at price-to-earnings (PE) ratio of 32.05x, this tells us the stock is overvalued compared to the US market average ratio of 17.6x , and overvalued based on current earnings compared to the Interactive Media and Services industry average of 26.43x .

NasdaqGS:MTCH Price Estimation Relative to Market, February 27th 2019
NasdaqGS:MTCH Price Estimation Relative to Market, February 27th 2019

After looking at MTCH’s value based on current earnings, we can see it seems overvalued relative to other companies in the industry. However, seeing as Match Group is perceived as a high-growth stock, we must also account for its earnings growth, which is captured in the PEG ratio. A PE ratio of 32.05x and expected year-on-year earnings growth of 15% give Match Group a quite high PEG ratio of 2.19x. Based on this growth, Match Group’s stock can be considered overvalued , based on its fundamentals.

What this means for you:

MTCH’s current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you’re a potential investor, now may not be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I urge you to complete your research by taking a look at the following:

  1. Financial Health: Are MTCH’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Past Track Record: Has MTCH been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of MTCH’s historicals for more clarity.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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.