Over the past six months, MercadoLibre’s shares (currently trading at $1,779) have posted a disappointing 10.9% loss, well below the S&P 500’s 12.9% gain. This might have investors contemplating their next move.
Following the pullback, is this a buying opportunity for 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 63.1%. Its ability to increase monetization while growing its unique active buyers demonstrates its platform’s value, as its users are spending significantly more than last year. 
2. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
MercadoLibre’s EPS grew at an astounding 35% compounded annual growth rate over the last three years. This performance was better than most consumer internet businesses.
3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
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 33.4% 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 18.5× forward EV/EBITDA (or $1,779 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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