Does MercadoLibre Still Offer Upside After Fintech Expansion and Three Year 138.3% Surge?

• Wondering if MercadoLibre is still a smart buy after its huge run, or if most of the upside is already priced in? You are not alone. That is exactly what this valuation deep dive is here to unpack.
• The stock has pulled back slightly in the short term, with a 2.0% drop over the last week and 1.6% over the last month. It is still up 17.5% year to date and 10.4% over the past year, with a 138.3% gain over three years.
• Recent headlines have focused on MercadoLibre expanding its fintech and logistics footprint across Latin America as it doubles down on payment services and faster delivery to strengthen its ecosystem. At the same time, regulatory and competitive developments in key markets like Brazil and Mexico have reminded investors that growth comes with both opportunity and risk.
• On our checklist of six valuation tests, MercadoLibre scores a 3 out of 6, suggesting it is undervalued on some measures but not a bargain on others. We will walk through different valuation approaches next and then finish by looking at another way to think about what this stock may be worth.

MercadoLibre delivered 10.4% returns over the last year. See how this stacks up to the rest of the Multiline Retail industry.

Approach 1: MercadoLibre Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates what a business is worth today by projecting the cash it can generate in the future and then discounting those cash flows back to their value in today’s dollars.

MercadoLibre generated about $8.8 billion in free cash flow over the last twelve months, a strong base for future growth. Analyst forecasts and Simply Wall St extrapolations point to free cash flow rising to roughly $15.7 billion by 2035, with mid single digit annual growth in the later years of the forecast period as the business matures.

Using a two stage Free Cash Flow to Equity model, these projected cash flows are discounted back to today to arrive at an estimated intrinsic value of $2,922 per share. Compared to the current share price, this implies the stock is about 29.0% undervalued on a DCF basis, suggesting the market is not fully pricing in MercadoLibre’s long term cash generation potential.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests MercadoLibre is undervalued by 29.0%. Track this in your watchlist or portfolio, or discover 903 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for MercadoLibre.

Approach 2: MercadoLibre Price vs Earnings

For a profitable, established business like MercadoLibre, the price to earnings ratio is a useful way to gauge how much investors are willing to pay today for each dollar of current profits. Higher growth and lower perceived risk usually justify a higher normal or fair PE ratio, while slower growth or higher uncertainty call for a lower one.

MercadoLibre currently trades at about 50.6x earnings, very close to the peer average of around 50.1x and well above the Multiline Retail industry average of roughly 19.9x. That premium reflects its stronger growth profile and more scalable, tech enabled business model compared to many traditional retailers.

Simply Wall St’s Fair Ratio framework goes a step further by estimating what PE multiple a company should trade on, given its earnings growth, industry, profit margins, market cap and risk profile. This makes it more tailored than a simple comparison to peers or industry averages. For MercadoLibre, the Fair Ratio is 34.1x, notably below the current 50.6x, suggesting the market is paying a substantial premium even after accounting for its attractive fundamentals.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1450 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your MercadoLibre Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce Narratives. This is a simple framework on Simply Wall St’s Community page that lets you attach a story to the numbers by turning your view of MercadoLibre’s growth, margins and risks into a concrete forecast. It links that forecast to a Fair Value, and then compares it to today’s price to see whether your story suggests buy, hold or sell. You can then update that view dynamically as fresh news or earnings arrive. For example, one investor might build a bullish Narrative around 25% plus annual revenue growth, rising margins and a fair value closer to $3,500, while a more cautious investor might emphasize intensifying competition, thinner profitability and a fair value near $2,170. Both perspectives can coexist side by side and evolve as new information comes in.

Do you think there's more to the story for MercadoLibre? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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