MercadoLibre Inc. (MELI)

Conclusion

MercadoLibre operates online marketplaces in Brazil, Mexico, Argentina and other markets, with Mercado Pago as its payments and lending arm. On 2026-11-09 the shares were priced at 1532.68 USD, giving a market capitalisation of 77.7 billion USD.

The verdict is undervalued. The P/E of 41.1x sits well below its ten-year median of 84.2x, and EV/EBITDA of 23.3x is below its median of 58.3x. The DCF gives 6253.63 USD per share at a discount rate of 11.8%. The fair value band runs from 4345.60 to 6518.40 USD with a midpoint of 5432.00 USD, a margin of safety of 254.4%. The reverse DCF implies growth of -5.0% a year, against five-year revenue growth of 48.7% a year.

The strongest numbers are ROIC of 14.2% against a WACC of 10.6%, free cash flow conversion of 6.3x over the trailing twelve months, and revenue growth in all ten of the last ten years. The weakest are the current ratio of 1.17 and quick ratio of 0.74, the Altman Z-score of 2.10 in the grey zone, and falling estimates, with next-year EPS estimates revised down 3.8% over 90 days. The company beat earnings expectations in only three of the last eight quarters.

Financial health

Financial strength is green, held up by net debt to EBITDA of 1.57x and interest coverage of 12.5x, while the current ratio of 1.17 and the Altman Z-score are neutral. Debt to equity is 1.59 and the quick ratio is 0.74, so short-term liquidity relies on operating cash flow rather than a large liquid buffer. The Altman Z-score of 2.10 falls in the grey zone. That model was designed for manufacturers, so it is only a rough guide for an internet retailer. Insolvency risk: low, about 1.4% by the estimate of the Ohlson model over one to two years.

Earnings quality

Earnings quality is green. Free cash flow conversion is 6.3x on a trailing basis and 4.6x over five years, and free cash flow after stock-based compensation is 11.6 billion USD. The accrual ratio is -0.30, and stock-based compensation is 0.8% of revenue. The share count has risen by a compound 0.4% a year over five years, so buybacks are not offsetting dilution. The Piotroski score is 5 of 9, and the Beneish M-score of -3.51 points to unlikely manipulation. The weak spot is the earnings record: three beats and five misses in eight quarters, with an average surprise of 5.6%. Current-year estimates were revised down 4.5% over 90 days, with 5 downgrades against 4 upgrades in the last 30 days.

Profitability

Profitability is green. The gross margin is 42.0% against a ten-year median of 48.1%, and the operating margin is 7.4% against 8.1%. The net margin is 4.9% against a median of 2.8%, and operating margin stability is 1.13. ROIC of 14.2% stands against a WACC of 10.6%, a ROIC minus WACC value of 3.6%. ROE of 23.1% is flattered by leverage. The DuPont split shows a net margin of 6.9%, an asset turnover of 0.68 and an equity multiplier of 6.32, all for the 2025 year-end. Most of the return therefore comes from balance-sheet gearing rather than from margins alone.

Growth

Growth is green on all four measures. Revenue compounds at 38.9% over three years, 48.7% over five years and 46.1% over ten years. Earnings per share compound at 61.3% over three years and 32.3% over ten years. Revenue grew in all ten of the last ten years. Next year's EPS growth is expected at 46.1%, although the estimate has been cut over the past 90 days.

Valuation

Valuation is green. The P/E is 41.1x against a ten-year median of 84.2x, a premium of -51.2%. EV/EBITDA is 23.3x against 58.3x (-60.1%), price to free cash flow is 6.5x against 84.7x (-92.3%), price to sales is 2.02x against 8.68x (-76.8%), and price to book is 9.48x against 28.50x (-66.8%). The DCF gives 6253.63 USD per share at a discount rate of 11.8%, with 51.3% of value in the terminal value. The fair value from historical multiples is 4610.37 USD. The fair value band is an order of magnitude built on fixed assumptions, including a 5% equity risk premium and capped growth, not a price target. The reverse DCF implies growth of -5.0%, against five-year revenue growth of 48.7% and five-year free cash flow per share growth of 62.4%. The company pays no dividend.

Risks

The main risk is thin liquidity: a quick ratio of 0.74 and a current ratio of 1.17 leave little room if operating cash flow falters. Leverage matters too, since debt to equity of 1.59 magnifies the ROE of 23.1%. If the operating margin of 7.4% slipped further below its median of 8.1%, the ROIC spread over WACC would narrow. Falling estimates would also weigh on the price, as next year's EPS estimate has been revised down. The analysis has limits. It has no debt maturity schedule and no revenue split by segment, so the refinancing profile and the contribution of each business line cannot be judged.