MELI Stock Study (5-13-26)

I recently did a stock study on MercadoLibre Inc. (MELI, $1,578.78).

M* writes:

     > MercadoLibre is the largest e-commerce marketplace in Latin
     > America, with more than 120 million unique active buyers and
     > 1 million active sellers at the end of 2025. The company is
     > roughly split between its e-commerce business, which includes
     > its fulfillment and advertising services, and its fintech
     > segment, which comprises its rapidly expanding payment and
     > digital wallet platform (Mercado Pago) and its lending business
     > (Mercado Credito). While the company operates in 18 countries,
     > its primary markets are Brazil, Argentina, and Mexico, which
     > account for more than 95% of its revenue.

Since 2022, this large-size company grows sales and EPS at annualized rates of 40.3% and 63.5%, respectively. Lines are mostly up, straight, and parallel except for sluggish EPS growth in ’25. The case to exclude earlier data, as discussed in BetterInvesting® circles (e.g. Manifest Investing), is a “growth-at-any cost” approach where revenue was heavily reinvested into logistics and expansion resulting in volatile or negative (e.g. 2018 – 2020) EPS. Starting in 2022, the company begins demonstrating significant operating leverage with net income seeing explosive growth. Value Line (VL) gives an Earnings Predictability score of only 25 reflecting the volatile EPS in earlier years. Shares outstanding increase 8.5% (0.9%/year).

Since 2022, PTPM trails peer and industry averages despite increasing from 7.4% to 9.8% (’25) with a mean of 9.9%. ROE leads peer and industry averages while ranging from 29.4% in ’22 to 47.8% in ’24 with a mean of 36.3% (shareholder equity consistently positive and increasing). Debt-to-Capital is less than peer and industry averages while falling from 74.8% to 62.8% (’25) with a mean of 65.6%.

Quick Ratio is 0.75 and Interest Coverage 15.6 per M* who assigns “Wide” Economic Moat, “Exemplary” rating for Capital Allocation, but only a C for Financial Health (per BetterInvesting® website). VL gives a B++ rating for Financial Strength.

With regard to sales growth:

• YF gives YOY ACE 37.1% and 24.7% for ’26 and ’27 (based on 23 analysts).
• Zacks gives YOY ACE 34.3% and 23.4% for ’26 and ’27, respectively (4 analysts).
• VL projects 24.1% per year from ’25-’30.
• CFRA gives ACE 36.5% YOY and 30.3% per year for ’26 and ’25-’27, respectively (23).
• M* gives 2-year ACE of 28.2% per year and projects 5-year annualized 21.8% in Equity Report.

I am forecasting below the range at 21.0% per year.

With regard to EPS growth:

• MarketWatch projects 24.1% and 30.2% per year for ’25-’27 and ’25-’28, respectively (based on 27 analysts).
• Nasdaq.com gives ACE 40.3% and 39.0% per year for ’26-’28 and ’26-’29 [6 / 4 / 1 analyst(s) for ’26 / ’28 / ’29].
• Seeking Alpha projects 4-year annualized of 31.7%.
• Finviz gives ACE 5-year annualized of 30.7% (3).
• LSEG projects LTG of 33.6%.
• YF gives YOY ACE 13.8% and 42.6% for ’26 and ’27, respectively (17).
• Zacks gives YOY ACE 14.3% and 44.4% for ’26 and ’27, respectively, and 5-year annualized of 39.6% (5).
• VL projects 26.0% annualized from ’25-’30.
• CFRA gives ACE 16.8% YOY and 28.6% per year for ’26 and ’25-’27, respectively (15).
• M* gives ACE long-term 31.5%/year and projects the same in Equity Report.

My 21.0% forecast is below the long-term-estimate range (mean of seven: 32.1%). Initial value is 2026 Q1 EPS of $37.89/share (TTM) rather than ’25 EPS of $39.40.

My Forecast High P/E is 35.0. Since 2022, high P/E decreases from 143 to 66.9 (’25) with a mean of 88.0 and a mean average P/E (also using low P/E from ’22 forward) of 66.9. I am below the range and at top of my comfort zone.

My Forecast Low P/E is 30.0. Since 2022, low P/E decreases from 63.0 to 43.3 (’25) with a mean of 45.9. I am forecasting below the range.

My Low Stock Price Forecast (LSPF) of $1136.70 is default based on initial value from above. That is 28.0% less than previous close and 26.0% less than the 52-week low.

These inputs land MELI in the BUY zone with a U/D ratio of 4.5. Total Annualized Return (TAR) is 17.2%.

PAR (using Forecast Average—not High—P/E) of 15.4% is outstanding especially for a large-size company. If a healthy margin of safety (MOS) anchors the study, then I can proceed based on TAR instead.

To assess MOS, I start by comparing my inputs with those of Member Sentiment (MS). Based on 109 studies done in the past 90 days (my study and 30 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 21.5%, 21.9%, 45.0, and 34.4, respectively. I am lower across the board. VL projects a future average P/E of 28.0: less than MS (40.2) and less than mine (32.5).

MS high / low EPS are $106.49 / $39.23 versus my $98.28 / $37.89 (per share). My high EPS is less due to a lower growth rate and TTM initial value. VL (M*) high EPS of $125.00 ($154.86) soars above both.

MS LSPF of $1302.70 implies a Forecast Low P/E of 33.2: less than the above-stated 34.4. MS LSPF is 3.5% less than the default $39.23/share * 34.4 = $1349.51 that results in more conservative zoning. MS LSPF exceeds mine by 14.6%, however.

MOS is robust in this study because my inputs are less than or near bottom of most historical/analyst/MS averages/ranges. Also supporting this assessment is MS TAR exceeding mine by 4.9% per year and my significantly lower LSPF.

With regard to valuation, PEG is 0.87 and 1.6 per Zacks and my projected P/E, respectively: fairly valued (M* has 0.91). Relative Value [(current P/E) / 5-year-mean average P/E] is quite low at 0.61. “Quick and Dirty” DCF calculates the stock as 37% undervalued while M* reports a 26% undervaluation.

Per U/D, MELI is a BUY right now. BetterInvesting® TAR criterion would be met [3439.7 / ((14.87 / 100 ) +1 ) ^ 5] ~ $1,720 given a forecast high price ~$3,440 (no dividend).

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