A can’t-miss bargain
Jamie Louko (MercadoLibre): This Latin American e-commerce and fintech leader is currently trading at a once-in-a-lifetime valuation. At just 4.7 times sales, MercadoLibre is at nearly the cheapest valuation it has ever seen since coming public in 2007. There have only been two other times in its life as a public company that MercadoLibre has traded this low: Earlier this year and in 2009.
Cheap companies can be a value trap -- a poor business facing secular decline or other risks but looks appealing due to its rock-bottom valuation. MercadoLibre doesn’t seem like a value trap, however. MercadoLibre dominates the e-commerce and fintech spaces in Latin America, with more than 20% share of total retail e-commerce sales in the region in 2021. Additionally, the company could improve its dominance: Statista expects MercadoLibre’s market share could reach almost 22% by 2023.
On the fintech side, MercadoLibre is also one of the top dogs. Due to unique conditions like a relatively young demographic in larger countries like Brazil and Mexico, along with a general desire for digital platforms, fintech in Latin America is expected to grow exponentially over the coming years. MercadoLibre already has over 38 million unique fintech users, which puts MercadoLibre in a great spot to thrive on these tailwinds.
This leadership has already led to impressive results. Over the trailing 12 months, MercadoLibre saw revenue surpass $8.8 billion. The company also obtained over $1 billion in free cash flow over the same period, despite its heavy investments in capturing the opportunity ahead.
With a powerful grip on the industries it operates in Latin America, MercadoLibre looks nicely positioned to benefit from the rising tides in the region. With attractive growth prospects over the next five years, today’s valuation looks like a gift to long-term investors.
