Better Buy: Momo Inc. vs. Match Inc

Online dating has been a mixed blessing for relationship-seeking singles, but it's been a big winner for investors. Shares of China's Momo (NASDAQ: MOMO) have raced 79% so far this year, up a juicy 138% since the start of last year. Tinder parent Match Group (NASDAQ: MTCH) has fared even better, soaring 85% in 2018, more than tripling since the start of last year.

Both stocks have made love connections with investors, but what if you could only hook up with one? Let's take a look at both scintillating investments to see which one is the right choice for you.

Look at all the lonely people

One would expect two of the market's hotter stocks to be checking in with heady growth, and that's certainly the case here. Momo -- a company that got its start as an online dating site in China but is gaining traction as a social video hub for folks that may or may not be interested in finding a soulmate -- saw revenue surge 58% higher in its latest quarter. Three months earlier, it was only targeting 51% to 55% in top-line growth.

Match is no slouch either. Revenue rose 36% in its latest quarter. The company is behind Tinder, PlentyOfFish, OkCupid, its namesake, and other sites, but Tinder is the key driver here, and while it may be primarily a hotbed for freeloaders looking to spark up a connection, it is a fast-growing moneymaker. There are now 1.7 million paying users on Tinder, and the premium Tinder Gold version of its app is doing well. Average revenue per user may be a mere $0.57, but that metric is up 33% over the past year.

Both companies are doing even better on the bottom line given the scalable nature of their platforms. Momo's adjusted earnings skyrocketed 90% in its latest quarter. Match Group's operating profit soared 81% with earnings per share more than doubling in the process.

The bottom-line bursts keep taking Wall Street by surprise. Momo has blasted through analyst profit targets with ease for six consecutive quarters. Match is working on a shorter streak of upbeat surprises, but it's still coming off back-to-back quarters of double-digit percentage beats.

It's not just the stocks rising for Momo and Match. Guidance also keeps getting nudged higher with every passing blowout quarter as the fundamentals continue to improve.

Let's get to valuation. One would think that these blistering appreciation runs would make the stocks insanely expensive, but that's not necessarily the case. Match Group is now trading at 41 times this year's projected earnings and a reasonable 33 times next year's estimate. Momo packs even lower ratios. It's going for a mind-boggling 17 times this year's profit target and less than 14 times next year's forecast.

Momo is growing faster and the valuation is juicy, but it's also the riskier of the two stocks. China can be pretty restrictive, something that investors in online gaming and even search have discovered over the years. Momo's spike in popularity is also tied to its live video social hub, and users can be fickle when the next hot platform emerges. The rub is that the same can be said about Match. The stock's resurgence is mostly the handiwork of Tinder's success, now accounting for nearly half of its revenue and the lion's share of Match Group's growth. The next hot dating app doesn't have to come from Match Group's roster of dating sites.

Each company can lose its growth driver, but Match is the less risky bet. However, the valuation gap is too wide, particularly in light of Momo's superior top-line growth rate. Both stocks should continue to thrive as long as they keep shaking their moneymakers, but the smartest investment right now seems to be Momo.

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Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool recommends Match Group and Momo. The Motley Fool has a disclosure policy.