MercadoLibre, Inc. (NASDAQ:MELI) Has Found A Path To Profitability

By
Simply Wall St
Published
July 27, 2021
NasdaqGS:MELI
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MercadoLibre, Inc. (NASDAQ:MELI) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. MercadoLibre, Inc. operates online commerce platforms in Latin America. The company’s loss has recently broadened since it announced a US$3.9m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$16m, moving it further away from breakeven. As path to profitability is the topic on MercadoLibre's investors mind, we've decided to gauge market sentiment. Below we will provide a high-level summary of the industry analysts’ expectations for the company.

View our latest analysis for MercadoLibre

MercadoLibre is bordering on breakeven, according to the 21 American Online Retail analysts. They expect the company to post a final loss in 2020, before turning a profit of US$6.5m in 2021. So, the company is predicted to breakeven approximately a year from now or less! At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 65%, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
NasdaqGS:MELI Earnings Per Share Growth July 27th 2021

Underlying developments driving MercadoLibre's growth isn’t the focus of this broad overview, though, take into account that typically a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

One thing we would like to bring into light with MercadoLibre is it currently has negative equity on its balance sheet. This can sometimes arise from accounting methods used to deal with accumulated losses from prior years, which are viewed as liabilities carried forward until it cancels out in the future. These losses tend to occur only on paper, however, in other cases it can be forewarning.

Next Steps:

This article is not intended to be a comprehensive analysis on MercadoLibre, so if you are interested in understanding the company at a deeper level, take a look at MercadoLibre's company page on Simply Wall St. We've also put together a list of relevant aspects you should look at:

  1. Valuation: What is MercadoLibre worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether MercadoLibre is currently mispriced by the market.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on MercadoLibre’s board and the CEO’s background.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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This article by Simply Wall St is general in nature. 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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Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.