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Why Match Group Stock Popped 13%

By Rich Smith – May 8, 2019 at 1:27PM

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A fired-up Match reports an earnings surge and crushes estimates.

What happened

Shares of dating app conglomerate Match Group (MTCH) stock are up 13.4% (as of 1:05 p.m. EDT) after reporting estimate-thumping earnings for its fiscal Q1 2019 last night.

Expected to report $0.33 in per-share profit on $464 million in revenue, Match Group met the consensus number for sales (actually, exceeded it ever so slightly) and returned profits of $0.42 per share -- $0.49 per share, pro forma.

Lit match.

Image source: Getty Images.

So what

Total sales at Match Group jumped 14% year over year to $465 million, with "average subscriber" numbers up 16% and average revenue per user (ARPU) flat at $0.60 per head. Net income of $0.42 per share showed 27% growth year over year.

That's the good news. The bad news is that because of the timing of a cash receipt, which Match received in Q4 2018 instead of Q1 2019, where the comparable receipt in the prior year was received in Q1 2018, free cash flow at the company declined dramatically year over year, down 30% to $82.6 million.

Now what

The other good news is that despite this decline in free cash flow, Match remains a cash machine, and its trailing-12-month results reflect $538 million in free cash flow (FCF) -- 7% better than the company's $501 million in reported GAAP earnings.

Personally, I still have my doubts as to whether this makes Match Group stock a good investment at a valuation of more than 35 times FCF -- but based on today's surge in share price, I'd say I'm in the minority in holding that opinion.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Match Group. The Motley Fool has a disclosure policy.

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