Hello Group Inc. (NASDAQ:MOMO): Can Strong ROE and Overseas Growth Sustain the Rally?

The recent surge in Hello Group Inc.'s (NASDAQ:MOMO) stock price—up 29% year-to-date as of June 2025—has sparked investor curiosity. While the company's valuation metrics suggest undemanding entry points, the disconnect between its historically robust Return on Equity (ROE) and stagnant earnings growth raises critical questions. Is this rally rooted in sustainable fundamentals, or is it a fleeting reaction to short-term catalysts?

Valuation Metrics: A Bargain or a Mirage?

Hello Group's stock currently trades at a Price-to-Book (P/B) ratio of 0.66, far below the 1.97 industry median for Interactive Media companies. This discount reflects skepticism about its ability to translate assets into earnings. Meanwhile, its trailing P/E of 6.37 lags behind its 5-year average of 7.28, suggesting the market has yet to fully price in recovery hopes.

However, the company's ROE—a measure of profitability relative to equity—has trended downward since peaking at 17.36% in late .S. (NASDAQ:MOMO) when its quarterly revenue beats estimates by at least RMB 2.8 billion, buying on earnings announcement dates and holding for 20 trading days, from 2020 to 2025. Conversely, a missed Q2 forecast or margin compression could trigger a sell-off.
- Hold for Long-Term**: The P/B discount and undemanding P/E suggest Hello Group is priced for failure. A successful overseas pivot could unlock value over 12-18 months.

Conclusion

Hello Group's stock surge reflects hope in its global expansion and valuation discounts, but earnings stagnation and operational risks loom large. Investors should treat this as a selective opportunity: prioritize patience, monitor Q2 results closely, and avoid chasing momentum without tangible margin or revenue improvements. The disconnect between ROE and earnings isn't insurmountable, but it demands proof—not just potential.

Disclosure: This analysis is for informational purposes only and not a recommendation to buy or sell securities.