What happened

Match Group (NASDAQ:MTCH) stock jumped 15.7% in September, according to data from S&P Global Market Intelligence . Shares, however, have pulled back 3.4% so far this month, through Oct. 5.

The market has been showing a lot of love for the online dating company, with shares up 78.8% so far in 2018, versus the S&P 500's 9.5% return.

Man holding a cell phone with hearts on the screen.

Image source: Getty Images.

So what

We can attribute Match stock's strong September performance to a continuation of the upward momentum it's enjoyed for some time thanks to the company turning in powerful earnings reports. 

On Aug. 7, Match released second-quarter results that beat Wall Street's estimates. Revenue jumped 36% year over year to $421.2 million, operating income surged 81% to $150.2 million, and earnings per share (EPS) rocketed 165% to $0.45. On an adjusted basis, EPS increased 156% to $0.41, cruising by the Street's expectation of $0.35.

Tinder's torrid growth continues to fuel Match's overall growth, with the dating app's number of paid subscribers soaring 81% year over year to 3.8 million and its average revenue per subscriber (ARPS) increasing 33% in the quarter. That powered Match's overall paid subscriber count up 27% to more than 7.7 million and its ARPS up 8%. Match's other better known properties include Match.com, PlentyOfFish, and OkCupid.

Now what

Thanks to its strong performance so far this year, Match Group raised its full-year revenue and profit guidance. The company now expects:

  • Total revenue of $1.68 billion to $1.72 billion, up from a prior outlook of $1.6 billion to $1.7 billion. This represents growth of 27.8% over 2017. 
  • Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $625 million to $650 million, up from $600 million to $650 million. At the midpoint of the range, this represents growth of 36% over 2017's adjusted EBITDA of $468.9 million. Moreover, management said in its earnings presentation that it expects this metric to come in near the top end of the range, which represents about 38.6% growth. 

Given the company's growth dynamics, Match stock is reasonably valued at 32.4 times forward earnings. Moreover, there's still a ton of growth potential in the global online dating market and Match -- being the 800-pound gorilla in the space -- should be poised to capture an outsize portion of it. 

The main thing investors need to watch is growing competition. Notably, in the spring, Facebook announced plans to enter the online dating market and has taken some baby steps into it. To what degree Match's dominance in the space and Facebook's recent big privacy issues act as a deterrent for folks to abandon the Match ship for the social media giant's budding service remain to be seen. I think it will be an uphill battle for Facebook.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.