Match Group, Inc. (NASDAQ:MTCH) shares are up more than 88.45% this year and recently decreased -2.47% or -$2.04 to settle at $80.60. KKR & Co. Inc. (NYSE:KKR), on the other hand, is up 27.51% year to date as of 08/13/2019. It currently trades at $25.03 and has returned -0.24% during the past week.
Match Group, Inc. (NASDAQ:MTCH) and KKR & Co. Inc. (NYSE:KKR) are the two most active stocks in the Internet Information Providers industry based on today’s trading volumes. To determine if one is a better investment than the other, we will compare the two companies’ growth, profitability, risk, return, and valuation characteristics, as well as their analyst ratings and sentiment signals.
Companies that can increase earnings at a high compound rate over time are attractive to investors. Analysts expect MTCH to grow earnings at a 12.95% annual rate over the next 5 years. Comparatively, KKR is expected to grow at a -7.16% annual rate. All else equal, MTCH’s higher growth rate would imply a greater potential for capital appreciation.
A high growth rate isn’t necessarily valuable to investors. In fact, companies that overinvest in low return projects just to achieve a high growth rate can actually destroy shareholder value. Profitability and returns are a measure of the quality of a company’s business and its growth opportunities. We’ll use EBITDA margin and Return on Investment (ROI) to measure this., compared to an EBITDA margin of 129.47% for KKR & Co. Inc. (KKR). MTCH’s ROI is 32.60% while KKR has a ROI of 1.60%. The interpretation is that MTCH’s business generates a higher return on investment than KKR’s.Cash Flow
Earnings don’t always accurately reflect the amount of cash that a company brings in. MTCH’s free cash flow (“FCF”) per share for the trailing twelve months was +0.44. Comparatively, KKR’s free cash flow per share was +0.10. On a percent-of-sales basis, MTCH’s free cash flow was 7.15% while KKR converted 2.28% of its revenues into cash flow. This means that, for a given level of sales, MTCH is able to generate more free cash flow for investors.
MTCH’s debt-to-equity ratio is 11.11 versus a D/E of 2.73 for KKR. MTCH is therefore the more solvent of the two companies, and has lower financial risk.
MTCH trades at a forward P/E of 39.24, a P/B of 155.00, and a P/S of 12.38, compared to a forward P/E of 12.42, a P/B of 1.45, and a P/S of 4.12 for KKR. MTCH is the expensive of the two stocks on an earnings, book value and sales basis. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.
Analyst Price Targets and Opinions
When investing it’s crucial to distinguish between price and value. As Warren Buffet said, “price is what you pay, value is what you get”. MTCH is currently priced at a -6.28% to its one-year price target of 86.00. Comparatively, KKR is -20.64% relative to its price target of 31.54. This suggests that KKR is the better investment over the next year.
Risk and Volatility
To gauge the market risk of a particular stock, investors use beta. Stocks with a beta above 1 are more volatile than the market as a whole. Conversely, a beta below 1 implies below average systematic risk. MTCH has a beta of 0.21 and KKR’s beta is 1.66. MTCH’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
Short interest, or the percentage of a stock’s tradable shares currently being shorted, is another metric investors use to get a pulse on sentiment. MTCH has a short ratio of 9.83 compared to a short interest of 6.52 for KKR. This implies that the market is currently less bearish on the outlook for KKR.
KKR & Co. Inc. (NYSE:KKR) beats Match Group, Inc. (NASDAQ:MTCH) on a total of 8 of the 14 factors compared between the two stocks. KKR is growing fastly and has lower financial risk. In terms of valuation, KKR is the cheaper of the two stocks on an earnings, book value and sales basis, KKR is more undervalued relative to its price target. Finally, KKR has better sentiment signals based on short interest.