Over the last six months, MercadoLibre’s shares have sunk to $1,811, producing a disappointing 16.9% loss - a stark contrast to the S&P 500’s 9% gain. This might have investors contemplating their next move.
Following the drawdown, is now the time to buy MELI? Find out in our full research report, it’s free.
Why Are We Positive on MercadoLibre?
Originally started as an online auction platform, MercadoLibre (NASDAQ: MELI) is a one-stop e-commerce marketplace and fintech platform in Latin America.
1. Eye-Popping Growth in Customer Spending
Average revenue per user (ARPU) is a critical metric to track because it measures how much the company earns in transaction fees from each user. ARPU also gives us unique insights into a user’s average order size and MercadoLibre’s take rate, or “cut”, on each order.
MercadoLibre’s ARPU growth has been exceptional over the last two years, averaging 77.7%. Although its unique active buyers shrank during this time, the company’s ability to successfully increase monetization demonstrates its platform’s value for existing users. 
2. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
MercadoLibre’s EPS grew at 45.9% compounded annual growth rate over the last three years, higher than its 40.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
Free cash flow isn’t a prominently featured metric in company financials and earnings releases, but we think it’s telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
MercadoLibre has shown terrific cash profitability, driven by its cost-effective customer acquisition strategy that enables it to stay ahead of the competition through investments in new products rather than sales and marketing. The company’s free cash flow margin was among the best in the consumer internet sector, averaging an eye-popping 33.7% over the last two years.
Final Judgment
These are just a few reasons why MercadoLibre ranks highly on our list. With the recent decline, the stock trades at 20.4× forward EV/EBITDA (or $1,811 per share). Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
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