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There aren’t many dating app stocks out there.

And to be fair, Facebook (FB) only facilitates dating.

eHarmony might have their IPO sometime this year.

But for the most part, there are three companies that lead the way: Bumble (BMBL), Momo (MOMO), and Match Group (MTCH).

It’s fair to say that since the days of momentum and meme stocks have waned, so has the popularity of these names.

Even lesser-known companies like Spark Networks (LOV) don’t even show up on the search radar.

Despite the headwinds, Match Group consistently gets a handful of pageviews each month, even when it doesn’t report earnings.

For a stock that’s been left for dead, this is fairly notable.

Though it may not be for the right reasons.

Some people believe there is no such thing as bad publicity. 

And in the case of the dating app Tinder that might be true. 

Back in February Netflix introduced a documentary called the Tinder Swindler. It was about a conman Simon Leviev who trickedwho made tricked unsuspecting women to give them all their money. 

Simon posed as an affluent, jet-setter, with family ties to a wealthy diamond mogul. Using the dating app Tinder, he conjured up elaborate plans to suck millions of dollars from his victims. 

The documentary racked up 45.8 million hours viewed worldwide during the first week of February. 

It was a massive hit for Netflix. But what did it do for Tinder and its parent company Match Group?

And more importantly, is it a stock worth owning?

Find out our analysis below.  

Match Group (MTCH) Business

MTCH provides dating products worldwide. The firm has the following brands in its portfolio: Tinder, Match, Meetic, OKCupid, Hinge, Pairs, PlentyOfFish, and OurTime, as well as various other brands.  

Match Group employs 2,000 people worldwide. Its products are available in 40 different languages with over 750 million downloads.

The company’s apps are free. However, to unlock all the features and benefits, users must pay a premium. 

During Q1 2022, paying members of the App increased 13% to 16.3M, up from 14.4M in the prior year. 

One metric MTCH tracks isare RPP, which stands for revenue per payer. In Q1 2022, MTCH increased its RPP 6% YoY to $16.

Tinder is one of the firm’s most recognized brands. Direct revenue grew 18% in Q1 compared to the prior-year quarter, driven by 17% payers growth to 10.7 million and RPP growth of 1%.

Financials

MTCH was growing revenues consistently until the pandemic hit. However,  the firm managed to get somewhat back on track in 2021. 

Operating income was $208 million last quarter, an increase of 10% over the prior-year quarter, representing an operating margin of 26% for Q1 2022. 

One of the impressive stats from MTCHs business is the company’s gross margin percentage which stands well above 70%

The company also managed to expand its operating margin substantially in 2020, despite a pullback in revenues.

In 2021, MTCH had a current ratio of 1.04x, which means they can handle their short-term obligations fairly easily.

Furthermore, MTCH in 2021 had a quick ratio of 0.87x,  which means its highly liquid assets are 0.87x greater than its short-term liabilities. 

The capital structure for MTCH is as follows: total debt of $4.04 billion and cash upwards of $921 million, and a market cap of approximately $22.14 billion. 

Valuation

MTCH has a price-to-sales ratio of 6.79X, which is above the sector median of 1.46X by a pretty wide margin. Considering its price-to-earnings (P/E) ratio is almost 80x looking backward over the last 12 months, the growth here is priced at a premium.

However, the forward P/E sits at 31.46x which is substantially lower than we would have expected although it’s higher than the sector median.

Yet, the price to cash flow gives us a more complete picture. 

With the trailing twelve months at 20.75x and the forward price to cash flow at 17.13x, it’s clear the earnings improvement isn’t related to an improving business.

On the margin side, MTCH boasts an EBITDA Margin (TTM) of 30.83%, which is significantly better than the sector median of 20.77%

Its net income margin is 9.12% which is impressive when compared to the sector median of 4.89%.

MTCH has experienced revenue growth of 23.87% YoY, which is much better than the sector median of 11.75%. But again, that doesn’t justify the P/S ratio.

Our Opinion – 5/10

Despite growth rising double digits in 2021, MTCH has an outrageous P/E of 83.79x. And that’s with the stock down more than 40% year-to-date. 

Unfortunately for MTCH valuations matter. And while it’s doing several things well in its business: strong gross profit margins, great EBITDA margin, and healthy net income margin…Its price-to-sales ratio is too high, P/E ratio is significantly higher than the sector median. 

Plus, the price-to-cash ratio tells a different story than expected earnings improvements.

And because of that, we don’t believe MTCH is a buy anytime soon. And should be avoided for the next six to twelve months.