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Momo Inc. (NASDAQ:MOMO): Will The Growth Last?

Peter Morris

Looking at Momo Inc.’s (NASDAQ:MOMO) earnings update in September 2018, the consensus outlook from analysts appear somewhat bearish, as a 18% rise in profits is expected in the upcoming year, relative to the higher past 5-year average growth rate of 76%. Currently with trailing-twelve-month earnings of US$319m, we can expect this to reach US$376m by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

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What can we expect from Momo in the longer term?

Longer term expectations from the 20 analysts covering MOMO’s stock is one of positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To get an idea of the overall earnings growth trend for MOMO, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.

NasdaqGS:MOMO Future Profit January 23rd 19

From the current net income level of US$319m and the final forecast of US$541m by 2022, the annual rate of growth for MOMO’s earnings is 20%. EPS reaches $3.37 in the final year of forecast compared to the current $1.61 EPS today. In 2022, MOMO’s profit margin will have expanded from 24% to 25%.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Momo, I’ve compiled three key aspects you should further examine:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. 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.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Momo? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.