Overall MELI gets a fundamental rating of 7 out of 10. We evaluated MELI against 30 industry peers in the Broadline Retail industry. MELI gets an excellent profitability rating and is at the same time showing great financial health properties. MELI is valued quite expensive, but it does show an excellent growth. With these ratings, MELI could be worth investigating further for growth and quality investing!.

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1. Profitability

2. Health

3. Growth

4. Valuation

5. Dividend

1. Profitability

1.1 Basic Checks

MELI had positive earnings in the past year.
MELI had a positive operating cash flow in the past year.
Of the past 5 years MELI 4 years were profitable.
MELI had a positive operating cash flow in each of the past 5 years.

1.2 Ratios

With a decent Return On Assets value of 5.66%, MELI is doing good in the industry, outperforming 70.00% of the companies in the same industry.
The Return On Equity of MELI (33.40%) is better than 96.67% of its industry peers.
Looking at the Return On Invested Capital, with a value of 18.27%, MELI belongs to the top of the industry, outperforming 93.33% of the companies in the same industry.
Measured over the past 3 years, the Average Return On Invested Capital for MELI is significantly above the industry average of 9.29%.

		Industry Rank	Sector Rank
ROA	5.66%
ROE	33.4%
ROIC	18.27%

ROA(3y)5.57%

ROA(5y)3.5%

ROE(3y)34.15%

ROE(5y)21.57%

ROIC(3y)20.35%

ROIC(5y)14.34%

1.3 Margins

Looking at the Profit Margin, with a value of 7.93%, MELI is in the better half of the industry, outperforming 76.67% of the companies in the same industry.
In the last couple of years the Profit Margin of MELI has grown nicely.
MELI has a better Operating Margin (11.96%) than 86.67% of its industry peers.
In the last couple of years the Operating Margin of MELI has grown nicely.
MELI has a Gross Margin of 45.14%. This is in the better half of the industry: MELI outperforms 66.67% of its industry peers.
In the last couple of years the Gross Margin of MELI has remained more or less at the same level.

		Industry Rank	Sector Rank
OM	11.96%
PM (TTM)	7.93%
GM	45.14%

OM growth 3Y25.83%

OM growth 5YN/A

PM growth 3Y98.37%

PM growth 5YN/A

GM growth 3Y2.74%

GM growth 5Y-0.81%

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ROA

ROE

ROIC

Operating and Profit Margin

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2. Health

2.1 Basic Checks

With a Return on Invested Capital (ROIC) well above the Cost of Capital (WACC), MELI is creating value.
The number of shares outstanding for MELI remains at a similar level compared to 1 year ago.
The number of shares outstanding for MELI has been increased compared to 5 years ago.
Compared to 1 year ago, MELI has an improved debt to assets ratio.

2.2 Solvency

MELI has an Altman-Z score of 3.49. This indicates that MELI is financially healthy and has little risk of bankruptcy at the moment.
Looking at the Altman-Z score, with a value of 3.49, MELI is in the better half of the industry, outperforming 73.33% of the companies in the same industry.
MELI has a debt to FCF ratio of 0.91. This is a very positive value and a sign of high solvency as it would only need 0.91 years to pay back of all of its debts.
Looking at the Debt to FCF ratio, with a value of 0.91, MELI belongs to the top of the industry, outperforming 83.33% of the companies in the same industry.
A Debt/Equity ratio of 0.55 indicates that MELI is somewhat dependend on debt financing.
MELI has a Debt to Equity ratio (0.55) which is in line with its industry peers.
Although MELI does not score too well on debt/equity it has very limited outstanding debt, which is well covered by the FCF. We will not put too much weight on the debt/equity number as it may be because of low equity, which could be a consequence of a share buyback program for instance. This needs to be investigated.

		Industry Rank	Sector Rank
Debt/Equity	0.55
Debt/FCF	0.91
Altman-Z	3.49

ROIC/WACC2.05

WACC8.93%

2.3 Liquidity

A Current Ratio of 1.17 indicates that MELI should not have too much problems paying its short term obligations.
MELI's Current ratio of 1.17 is on the low side compared to the rest of the industry. MELI is outperformed by 76.67% of its industry peers.
A Quick Ratio of 1.15 indicates that MELI should not have too much problems paying its short term obligations.
The Quick ratio of MELI (1.15) is comparable to the rest of the industry.
The current and quick ratio evaluation for MELI is rather negative, while it does have excellent solvency and profitability. These ratios do not necessarly indicate liquidity issues and need to be evaluated against the specifics of the business.

		Industry Rank	Sector Rank
Current Ratio	1.17
Quick Ratio	1.15

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WACC

Debt/Equity

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Altman-Z score

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3. Growth

3.1 Past

The Earnings Per Share has grown by an impressive 44.60% over the past year.
MELI shows a strong growth in Earnings Per Share. Measured over the last years, the EPS has been growing by 172.65% yearly.
Looking at the last year, MELI shows a very strong growth in Revenue. The Revenue has grown by 36.94%.
Measured over the past years, MELI shows a very strong growth in Revenue. The Revenue has been growing by 55.35% on average per year.

EPS 1Y (TTM)44.6%

EPS 3Y172.65%

EPS 5YN/A

EPS Q2Q%6.26%

Revenue 1Y (TTM)36.94%

Revenue growth 3Y43.24%

Revenue growth 5Y55.35%

Sales Q2Q%39.48%

3.2 Future

The Earnings Per Share is expected to grow by 31.97% on average over the next years. This is a very strong growth
MELI is expected to show a strong growth in Revenue. In the coming years, the Revenue will grow by 24.56% yearly.

EPS Next Y11.47%

EPS Next 2Y27.93%

EPS Next 3Y31.86%

EPS Next 5Y31.97%

Revenue Next Year38.55%

Revenue Next 2Y33.57%

Revenue Next 3Y29.48%

Revenue Next 5Y24.56%

3.3 Evolution

The estimated forward EPS growth is still strong, although it is decreasing when compared to the stronger growth in the past years.
The estimated forward Revenue growth is still strong, although it is decreasing when compared to the stronger growth in the past years.

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4. Valuation

4.1 Price/Earnings Ratio

Based on the Price/Earnings ratio of 52.15, the valuation of MELI can be described as expensive.
Compared to the rest of the industry, the Price/Earnings ratio of MELI is on the same level as its industry peers.
When comparing the Price/Earnings ratio of MELI to the average of the S&P500 Index (27.21), we can say MELI is valued expensively.
The Price/Forward Earnings ratio is 34.64, which means the current valuation is very expensive for MELI.
Based on the Price/Forward Earnings ratio, MELI is valued a bit more expensive than the industry average as 63.33% of the companies are valued more cheaply.
MELI is valuated rather expensively when we compare the Price/Forward Earnings ratio to 24.26, which is the current average of the S&P500 Index.

		Industry Rank	Sector Rank
PE	52.15
Fwd PE	34.64

4.2 Price Multiples

70.00% of the companies in the same industry are cheaper than MELI, based on the Enterprise Value to EBITDA ratio.
Compared to the rest of the industry, the Price/Free Cash Flow ratio of MELI indicates a somewhat cheap valuation: MELI is cheaper than 73.33% of the companies listed in the same industry.

		Industry Rank	Sector Rank
P/FCF	12.59
EV/EBITDA	27.7

4.3 Compensation for Growth

The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates an expensive valuation of the company.
The excellent profitability rating of MELI may justify a higher PE ratio.
MELI's earnings are expected to grow with 31.86% in the coming years. This may justify a more expensive valuation.