Here's Why This E-commerce Stock is Undervalued

MELI peaked at a $1,922.56 per share in late 2021

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MercadoLibre Inc (NASDAQ:MELI) is an Argentinean e-commerce company and the operator of the largest online marketplace in Latin America.MELI is trying to recover from its more than two-year low of $600.68, though a brief consolidation near the $1,098 level sent the security lower in mid-August. The stock looks to be back on an uptrend, though, and could clear recent pressure at the 160-day moving average, should today's positive price action hold. 

meli sept 9

Speculating on MELI's next move with options could be the way to go. The security's Schaeffer's Volatility Index (SVI) of 61% sits in the 32nd percentile of its annal range. This implies options traders are pricing in low volatility expectations for the security right now. Additionally, the stock's Schaeffer's Volatility Scorecard (SVS) sits at 96 out of a possible 100. This means MELI has tended to outperform said volatility expectations. 

It's worth noting that stock trades at an extremely high forward price-earnings ratio of 78.74 and a price-sales ratio of 4.85. Nonetheless, MELI's valuation metrics are indicative of the business’s rapid growth rate. The e-commerce giant has generated 514% annual revenue growth since fiscal 2018, reporting a 78% increase in revenues for fiscal 2021 alone. MercadoLibre also reached profitability in 2021, reporting $83.3 million in net income, marking an $87.2 million increase from the $3.9 million in net losses it reported for fiscal 2020.

In addition, MELI is expected to end fiscal 2022 with a 46.6% increase in revenues and a 277.2% increase in earnings, justifying MercadoLibre stock’s high valuation metrics. The e-commerce business is also estimated to see 26.7% revenue growth and 64.3% earnings growth in fiscal 2023, making it a very attractive option for growth investors over the coming years, even after its big recovery.

 

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