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Let's talk about the popular MercadoLibre, Inc. (NASDAQ:MELI). The company's shares saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$2,117 and falling to the lows of US$1,666. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether MercadoLibre's current trading price of US$1,799 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at MercadoLibre’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for MercadoLibre
Is MercadoLibre Still Cheap?
MercadoLibre is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that MercadoLibre’s ratio of 63.48x is above its peer average of 20.18x, which suggests the stock is trading at a higher price compared to the Multiline Retail industry. But, is there another opportunity to buy low in the future? Given that MercadoLibre’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of MercadoLibre look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. MercadoLibre's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? It seems like the market has well and truly priced in MELI’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe MELI should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.