Quality Equities
Quality Equity Investor, Concentrated Portfolios
MercadoLibre is compounding faster than the market gives it credit for, trading at 30x forward earnings with 37% estimated 2027 EPS growth per @DimitryNakhla's list, below its growth rate on a PEG basis. FICO shows the same at 25x with 27% growth, part of a quality discount broader than most people realize. x.comÂ
MercadoLibre's margin squeeze reflects an enormous reinvestment runway, not a structural problem, so JPMorgan's downgrade may mark the bottom of a margin trough. It is investing $3.4 billion in Argentine logistics while AI shopping assistants already handle about 20% of GMV. As @CapexAndChill notes, it is spending on lower free-shipping thresholds and credit to defend Brazil against Shopee. x.comÂ
MercadoLibre's commerce and fintech revenue growth underpins the view that its shares are undervalued at current prices. The attached chart shows quarterly commerce services revenue reaching $4.3 billion and fintech revenue $4.4 billion in June 2026, up from $769 million and $467 million in March 2021. x.comÂ
MercadoLibre seems cheap at roughly 3x enterprise value to sales given revenue is up about 700% while its stock price is back at 2020 levels. It is hard to see how the multiple can keep compressing. x.comÂ
MercadoLibre's collapsing margins and earnings make its 45-times-earnings valuation look like a value trap. It faces intense competition, and less of its revenue reaches the bottom line; falling earnings make the stock more expensive even as its price falls. Nu Holdings trades at 17 times earnings and Inter & Co at 7 times, with both growing revenue and earnings robustly. Selling MercadoLibre to build positions in companies with better fundamentals is under consideration. x.com x.com x.com x.comÂ
MercadoLibre is cheap against its cash earnings, at 24x trailing and 16x next year's, while retailers usually get 20x. Fair value runs $2,075 to $2,642, or 20x next year's cash earnings give or take 12%, putting the $1,869 price 10% under the low end; it would be expensive above $2,328. The read leans on the forecast, with forward earnings 51% above trailing, and is a valuation view only, with no fundamental work. x.comÂ
MercadoLibre is cheap for a company with an unmatched growth record: 28 straight quarters of 30%+ revenue growth, something no other company has achieved. Yet the stock is almost flat over five years, trading at 29x forward earnings and 2.4x EV/sales. x.comÂ
Political uncertainty and Amazon competition have held MercadoLibre's stock back despite a humming business. The company is great and the stock deserves to turn, but at roughly 45 times earnings and only about 12% gained over five years, it has remained a difficult stock to own. x.com x.com x.com x.comÂ
MercadoLibre looks cheap for its projected growth. Revenue is estimated to rise from $28.89 billion in 2025 to $65.81 billion in 2028, a 32% annual rate, with EPS growing from $39.40 to $90.14, leaving the stock at 18.1x 2028 EPS. Forecasting revenue, margins and earnings that far out is not easy, though. x.comÂ
Latin American equities' sell-off looks overdone as long as the underlying businesses keep growing and fundamentals remain intact. Under that condition, the drop is market noise, and MercadoLibre and Nu Holdings could offer attractive opportunities amid the panic. x.comÂ
MercadoLibre can tread water for a long time because it constantly has to spend to defend its revenue base. It is a very capital-intensive business trading at more than 40x forward earnings, leaving it vulnerable if revenue ever slows. x.comÂ
MercadoLibre's growth under Lula makes today's selloff look absurd. On a TTM basis since Q1 2023, revenue is up 206% and EPS 200%; having done so well during his term, it should be fine going forward. x.com x.comÂ
