A Proven Track Record For The Long-Term Investor
MercadoLibre has consistently grown its business, delivering strong returns for shareholders. Over the past five years, the stock has returned 176%, outperforming the S&P 500 by 90%. Over the past decade, the return has been a staggering 1,500%.
Missing The Trees For The Forest: A Tale Of One-Time Expenses And Undervaluation
Despite the company’s strong performance, the stock has declined 26% from its 52-week high due to concerns about profitability. However, when one-time expenses are removed from the analysis, the company has actually beaten margin expectations and shown continued operational margin growth and overall earnings.
This has led to a significant undervaluation of the stock. MercadoLibre has a relative strength index (RSI) of 23, which indicates it is oversold. The P/E ratio has contracted from 134 to 70, and the forward P/E is a reasonable 41. The Price to Sales Ratio has also contracted from 6.1 to 4.8.
Understanding The Risks: An Investor’s Compass
Investing in MercadoLibre carries some risks, including:
* Take Rates: MercadoLibre’s take rates have declined slightly in recent quarters. This trend needs to be monitored to ensure it does not continue.
* Credit Quality: The company’s NIMAL has increased, indicating some stress in risk management. This should be closely monitored going forward.
* Operating Margins: MercadoLibre’s operating margins have been impacted by one-off expenses. They should bounce back in the future, but this should be monitored.
Potential Short-Term Pain For Long-Term Gain
MercadoLibre recently announced a significant increase in its workforce, which could lead to short-term margin pressure. However, this is a sign that the company is investing in its future growth.
The Digital Ecosystem Continues To Grow
MercadoLibre is not just an e-commerce company. It is also a major player in fintech and is expanding into media streaming and advertising. This creates a holistic digital ecosystem that could make the company a central digital life hub for millions of people.
My Conclusion On MELI As A Long-Term Play
MercadoLibre is a long-term growth story with the potential to deliver significant returns for investors. The company is trading at a discount from its all-time high and is well-positioned to continue its growth in the years to come.
