When stock prices are falling, the best mindset to have is a long term one. High quality stocks such as Momo Inc has fared well over time in a fickle stock market, which is why I want to bring it into light amongst all the chaos. Below I take a look at three key features of what makes a robust defensive stock investment: its size, financial health and track record. View our latest analysis for Momo
Momo Inc. operates a mobile-based social and entertainment platform in the People’s Republic of China. Formed in 2011, and led by CEO Yan Tang , the company now has 1,244 employees and with the stock’s market cap sitting at US$8.79B, it comes under the mid-cap category. Typically, large companies are well-established and highly resourced, meaning that stock market volatility may impact some short-term strategic decisions but unlikely to matter in the long run. Therefore, large-cap stocks are a safe bet to buy more of when the general market is selling off.
Having high levels of debt can put pressure on companies during downturns since they have to continuously service their debt payments and interest costs. This means they need to maintain enough cash-on-hand for these expenses as well as maintain a cash cushion for unforeseen circumstances, which can get costly. In Momo’s case, they have no debt on the books, which eliminates short-term debt pressures highly-levered companies may face. Its cash and short-term investment is also sufficient to cover other upcoming liabilities, which means MOMO is financially robust in the face of a volatile market.
MOMO’s year-on-year earnings growth has been positive over the past five years, with an average annual growth rate of 76.95%, outpacing the industry growth rate of 18.27%. It has also returned an ROE of 30.35% recently, above the industry return of 12.85%. This continuous market outperformance demonstrates a strong track record of delivering robust returns over many years, raising my confidence in Momo as a long-term hold.
Next Steps:Based on these three factors, MOMO makes for a strong long-term investment in the face of a fickle stock market. If you’re a risk averse investor, lining your portfolio with proven companies you’re willing to buy more and more of as the price falls, is a good strategy to build your wealth over the long run. This is the beginning of your research, but before you decide to buy MOMO, I highly urge you to understand more about the company, in particular, in these following areas:
- Future Outlook: What are well-informed industry analysts predicting for MOMO’s future growth? Take a look at our free research report of analyst consensus for MOMO’s outlook.
- 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.
- 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.