Short Analysis: Momo Inc

Recently I’ve been looking for undervalued Chinese companies listed on the US stock exchanges. Their Total Market cap / GDP Ratio is very favorable. I stumbled upon Momo Inc.

Momo Inc provides mobile-based social networking services. The firm enables its users to establish and expand social relationships based on location and interests. Its platform includes Momo mobile application and a variety of related features, functionalities, tools, and services that it provides to users, customers and platform partners. It also operates a stand-alone video application called Hani, which features the live video content on its core Momo mobile application. The company principally derives its revenue from live video service, value-added services, mobile marketing services, mobile games and other services. It operates in three segments: Momo’ service lines, Tantan’s service lines, and QOOL’s service line out of which Momo’ service lines segment derives majority revenue. Momo was founded 2011 and has its main office in Beijing, China.

Chart

Statistics
I’ve only found 5 years of data.

Year20152016201720182019
Sales (MRMB)843370788861340817015
EPS (RMB)0.212.415.176.596.76
Total Equity (MRMB)3034440167521102213718
Cash flow from operations(MRMB)57.63211.9437.74483.42776.89
ROIC11.43%166.85%210.36%59.60%36.25%
P/E191.1125.4715.911.8217.35
Yearly average10 year5 year1 year
ROICn/a97%36%
Sales Growth Raten/a112%27%
EPS Growth Raten/a138%3%
Equity Growth Raten/a46%24%
Cash Growth Raten/a92%61%

Calculations using historic growth rates and different P/E

Median P/EAverage P/EHistorical Growth rate x 2Currency
P/E17.3552.3392
Calculated Price (fair value)129038926842RMB
Margin of Safety (50%)64519463421RMB
Margin of Safety (50%)91275483USD

Current price: 19.56 USD

The numbers look good and if they can keep up somewhat with their growth the stock seems severely undervalued. More research is needed. I’ll buy a starter position (Approx. 400 USD) when the market opens today. Stoploss 5-10% from the buy price.

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