MercadoLibre Inc (NASDAQ:MELI): Is It A Good Long Term Opportunity?
MercadoLibre Inc’s (NASDAQ:MELI) announced its latest earnings update in December 2017, which showed that the company endured a immense headwind with earnings deteriorating by -89.89%. Below is my commentary, albeit very simple and high-level, on how market analysts perceive MercadoLibre’s earnings growth trajectory over the next couple of years and whether the future looks brighter. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings. View our latest analysis for MercadoLibre
Analysts’ outlook for next year seems positive, with earnings growth more than doubling. Earnings continue to grow strongly in the next couple of years, finally generating US$297.53M in 2021.
Even though it is informative knowing the growth rate year by year relative to today’s figure, it may be more beneficial determining the rate at which the earnings are growing every year, on average. The benefit of this approach is that we can get a bigger picture of the direction of MercadoLibre’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I’ve inserted a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 40.26%. This means that, we can expect MercadoLibre will grow its earnings by 40.26% every year for the next couple of years.
Next Steps:
For MercadoLibre, I’ve compiled three essential aspects you should further research:
Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Valuation: What is MELI worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether MELI is currently mispriced by the market.
Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of MELI? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
