MercadoLibre $MELI
(Shared this on twitter yesterday but feel it's also worth sharing here for anyone that doesn't follow me there)

I’ve been taking a look at $MELI recently from a financial perspective.

Revenue: Extremely strong growth since the start of 2019. $MELI also estimate 55% growth in Q4 and 36% for full year 2022.


Gross Profit: Similar trend to revenue. Interesting to note that gross profit (68%) increased faster than revenue (66%) last quarter. Scale. Gross margin currently sits at 43%.


Operating Expenses: Main item I am focused here on is Sales & Marketing. As we can see S&M as a % of revenue is trending down over time.

This means that $MELI cannot be deemed to be subsidising e-commerce revenue through excessive S&M. For comparison $SE ratio is 40%.


Valuation: Despite all of this growth, $MELI is at its lowest Price/Sales valuation multiple since March 2020 when the pandemic hit.

For further comparison, $SE trades at a price to sales multiple of 18 vs $MELI 13 with $MELI also having a 3% point better gross margin.


Conclusion

I really need to keep digging with this one. As growth stocks go, this one looks very reasonably priced at the moment and the upside appears to well outweigh the downside.
Doug Helton's avatar
Really feel like Mercadolibre is a buying opportunity here

Doug Helton's avatar
If we're trying to understand the rationale for the drop in share price— would you say it comes down to sector rotation and the market in general not favoring growth stocks at the moment? Seems like the fundamentals are there for Mercado Libre.
Wolf of Harcourt Street's avatar
@doughelton I think that plus some political / inflation worries in South America mainly Argentina. The company has always faced these however so is an expert at navigating same. $MELI fundamentally as a company is performing really well as you touched on

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