The world of online dating is crowded with many companies looking to carve out a niche for themselves. Two of the most successful are Momo, which is the largest online dating service in China, and Match, which owns such websites and apps as Plenty of Fish, OkCupid, and Tinder.

Both of these stocks performed well last year, with Match's 92% gain outpacing Momo's 41% gain. Will Match continue to outperform Momo moving forward? Let's dig into these companies' respective businesses and see which is the better growth stock to buy today. 

Core operations

Match, which is in the process of separating from its parent company IAC/InterActiveCorp, generates the bulk of its revenue via paid subscriptions, particularly on its crown jewel, Tinder. Momo describes itself as a mobile-based social and entertainment platform, and the company makes most of its money from its live video services. Momo started offering live video streams on its app in 2015, and the feature allows users to buy virtual gifts and offer them to their favorite streamers. Momo keeps a percentage of the revenue from these virtual gifts.

Person browsing dating app on a phone.

Image source: Getty Images.

The Chinese tech company also operates a segment called value-added service, which generates money from paid subscriptions on its namesake app and another dating app it owns called Tantan. The value-added service segment also makes money from the exchange of virtual gifts (outside of the video feature). Lastly, Momo makes money via mobile marketing and mobile games. 

Financial results

During the third quarter, Momo recorded 114.1 million monthly active users (MAUs), a 3.3% year-over-year increase, and the company recorded a net revenue figure of $622.8 million, 22% higher than the year-ago period. Further, Momo recorded an operating income of $138.9 million and a net income of $125 million. 

By contrast, Match's average subscribers for the third quarter was 9.6 million, 19% higher than the prior-year quarter, and the company's $541 million revenue increased by 22% year over year. Match's average revenue per user (ARPU) was $0.59 and grew by 4% year over year. Also, the tech company recorded an operating income of $177 million and a net income of $151.5 million. 

While Momo recorded a higher revenue during the third quarter, Match seems to be doing a better job of controlling costs, with its net margin of 28% coming ahead of Momo's 20% net margin. However, Momo's revenue growth -- while decelerating in recent quarters -- is still more impressive than Match's, as the following table shows. 

YOY Revenue Growth

Company

Q3 2018

Q4 2018

Q1 2019 

Q2 2019

Q3 2019

Momo (NASDAQ:MOMO)

51%

50%

35%

32%

22%

Match (NASDAQ:MTCH)

29%

21%

14%

18%

22%

Data sources: Momo and Match. YOY = year over year.

Valuation

Match seems significantly more expensive than Momo when looking at their respective price to earnings (P/E) ratios. Match currently trades at 46.3 times forward earnings, whereas Momo trades at an attractive 9.8 times forward earnings. But comparing their price to earnings growth (PEG) tells a very different story: Match's current PEG is 3.07, and while still a bit high, it compares favorably to Momo's PEG of 31.9. In other words, Match is the much cheaper stock when taking into account expected earnings growth. 

The verdict

Momo has a more versatile business, with its revenue coming from many different sources, including its video streaming and mobile gaming businesses. Momo also boasts more users overall than Match does. But Match seems to be doing a better job of controlling its costs and boasts higher margins. Further, Match provides better value, with its PEG being much lower than that of Momo. For those reasons, I think Match wins this head-to-head matchup.