MercadoLibre (MELI) is showing fantastic growth prospects in a booming market segment as analysts continue to raise estimates. Given the valuations and volatility, however, this is truly and aggressive play.
Company Description
MercadoLibre is an e-commerce platform in Latin America. The company provides a safe, efficient way for individuals and companies to buy, sell, and advertise online. MercadoLibre has millions of users and is one of the top 50 sites worldwide.
Revenues spike 42%
On May 6 MercadoLibre reported first-quarter results that included net revenues of $46 million, a 42% increase since the same period last year. The company saw a 26% growth in registered users, which is now just below 45 million.
Net income surged 79% to $15.5 million, from $6.8 million. After adjustments, earnings broke down to 22 cents per share, 4 cents ahead of the Zacks Consensus Estimate.
Bullish Comments
MercadoLibre’s CEO offered commentary that focused on the increasing traction in the region and industry, as well as synergies throughout the company.
Estimates Moving Higher
Following the press release MercadoLibre analysts unanimously raised their full-year targets. The Zacks Consensus Estimate rose 6 cents to $1.09.
The Zacks #1 Rank (Strong Buy) is expected to earn $1.45 next year, up 8 cents. If MercadoLibre hits these estimates annual growth rates will be 50% and 32%, respectively.
Strong Fundamentals
MercadoLibre carries virtually no long-term debt, relative to its balance sheet, and returns more than 32% on equity. The next profit margin is coming in at 20%.
The valuations are going to keep traditional value investors on the sidelines, but if you really like earnings momentum and growth, you may be willing to look past the price tag.
Even if you go out to 2011 earnings, shares are still trading at 33 times earnings. The PEG is not bad, but at 1.2 times is still less than ideal.
The Chart
As you would expect from an emerging market, e-commerce company, shares have been volatile to say the least. However, if the support holds up, you could use that level as a guide to get a very nice entry price.
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