Shares of MercadoLibre (MELI) have been strong performers lately, with the stock up 22.8% over the past month. The stock hit a new 52-week high of $1625.24 in the previous session. MercadoLibre has gained 91.5% since the start of the year compared to the 20.9% move for the Zacks Retail-Wholesale sector and the 48.9% return for the Zacks Internet - Commerce industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on November 1, 2023, MercadoLibre reported EPS of $7.16 versus consensus estimate of $5.85 while it beat the consensus revenue estimate by 5.22%.
For the current fiscal year, MercadoLibre is expected to post earnings of $22.80 per share on $14.35 billion in revenues. This represents a 139.24% change in EPS on a 36.16% change in revenues. For the next fiscal year, the company is expected to earn $34.76 per share on $17.5 billion in revenues. This represents a year-over-year change of 52.48% and 21.97%, respectively.
MercadoLibre may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
MercadoLibre has a Value Score of C. The stock's Growth and Momentum Scores are A and C, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 71.1X current fiscal year EPS estimates, which is a premium to the peer industry average of 20.8X. On a trailing cash flow basis, the stock currently trades at 92.1X versus its peer group's average of 14.3X. Additionally, the stock has a PEG ratio of 1.28. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, MercadoLibre currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if MercadoLibre passes the test. Thus, it seems as though MercadoLibre shares could still be poised for more gains ahead.
How Does MELI Stack Up to the Competition?
Shares of MELI have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Travelzoo (TZOO). TZOO has a Zacks Rank of # 2 (Buy) and a Value Score of B, a Growth Score of B, and a Momentum Score of F.
Earnings were strong last quarter. Travelzoo beat our consensus estimate by 77.78%, and for the current fiscal year, TZOO is expected to post earnings of $1 per share on revenue of $84.92 million.
Shares of Travelzoo have gained 37.2% over the past month, and currently trade at a forward P/E of 12.69X and a P/CF of 17.94X.
The Internet - Commerce industry is in the top 14% of all the industries we have in our universe, so it looks like there are some nice tailwinds for MELI and TZOO, even beyond their own solid fundamental situation.
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