Intrinsic value of MercadoLibre - MELI

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$223.82

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$223.82

 
Intrinsic value

$711.82

 
Up/down potential

+218%

 
Rating

str. buy

 
Value-price divergence* premium content

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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of MELI stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 9.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  29.45
  41.40
  37.76
  34.48
  31.54
  28.88
  26.49
  24.34
  22.41
  20.67
  19.10
  17.69
  16.42
  15.28
  14.25
  13.33
  12.49
  11.74
  11.07
  10.46
  9.92
  9.43
  8.98
  8.58
  8.23
  7.90
  7.61
  7.35
  7.12
  6.90
  6.71
Revenue, $m
  844
  1,193
  1,644
  2,211
  2,908
  3,748
  4,741
  5,895
  7,217
  8,708
  10,372
  12,207
  14,211
  16,383
  18,718
  21,212
  23,863
  26,665
  29,617
  32,716
  35,961
  39,350
  42,885
  46,567
  50,397
  54,380
  58,520
  62,823
  67,294
  71,940
  76,771
Variable operating expenses, $m
 
  928
  1,275
  1,712
  2,249
  2,896
  3,660
  4,549
  5,567
  6,715
  7,996
  9,400
  10,944
  12,616
  14,415
  16,336
  18,377
  20,535
  22,808
  25,195
  27,693
  30,304
  33,026
  35,861
  38,811
  41,878
  45,067
  48,380
  51,823
  55,401
  59,121
Fixed operating expenses, $m
 
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  6
  6
  7
  7
  7
  7
  7
  7
  8
  8
  8
  8
  8
Total operating expenses, $m
  663
  932
  1,279
  1,716
  2,253
  2,901
  3,665
  4,554
  5,572
  6,720
  8,001
  9,405
  10,949
  12,622
  14,421
  16,342
  18,383
  20,541
  22,814
  25,201
  27,700
  30,311
  33,033
  35,868
  38,818
  41,885
  45,075
  48,388
  51,831
  55,409
  59,129
Operating income, $m
  181
  261
  365
  495
  655
  848
  1,076
  1,341
  1,645
  1,988
  2,370
  2,801
  3,262
  3,761
  4,298
  4,871
  5,480
  6,124
  6,803
  7,515
  8,261
  9,040
  9,852
  10,699
  11,579
  12,495
  13,446
  14,435
  15,463
  16,531
  17,641
EBITDA, $m
  210
  291
  402
  542
  714
  921
  1,166
  1,451
  1,778
  2,146
  2,557
  3,010
  3,505
  4,041
  4,618
  5,234
  5,888
  6,580
  7,309
  8,074
  8,876
  9,713
  10,586
  11,495
  12,441
  13,424
  14,447
  15,509
  16,613
  17,761
  18,954
Interest expense (income), $m
  8
  11
  17
  32
  51
  74
  101
  134
  172
  215
  264
  319
  379
  445
  516
  593
  675
  762
  854
  951
  1,053
  1,159
  1,271
  1,387
  1,508
  1,634
  1,764
  1,900
  2,042
  2,189
  2,341
Earnings before tax, $m
  185
  250
  347
  463
  604
  774
  975
  1,208
  1,473
  1,773
  2,106
  2,482
  2,883
  3,316
  3,781
  4,278
  4,805
  5,362
  5,949
  6,564
  7,208
  7,881
  8,582
  9,312
  10,071
  10,861
  11,682
  12,535
  13,421
  14,342
  15,300
Tax expense, $m
  49
  68
  94
  125
  163
  209
  263
  326
  398
  479
  569
  670
  778
  895
  1,021
  1,155
  1,297
  1,448
  1,606
  1,772
  1,946
  2,128
  2,317
  2,514
  2,719
  2,932
  3,154
  3,384
  3,624
  3,872
  4,131
Net income, $m
  136
  183
  253
  338
  441
  565
  712
  881
  1,075
  1,294
  1,537
  1,812
  2,104
  2,421
  2,760
  3,123
  3,508
  3,914
  4,343
  4,792
  5,262
  5,753
  6,265
  6,798
  7,352
  7,929
  8,528
  9,150
  9,797
  10,470
  11,169

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  487
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,367
  1,244
  1,714
  2,306
  3,033
  3,908
  4,944
  6,147
  7,525
  9,081
  10,815
  12,728
  14,819
  17,083
  19,518
  22,119
  24,883
  27,805
  30,884
  34,115
  37,498
  41,033
  44,719
  48,557
  52,552
  56,705
  61,022
  65,509
  70,171
  75,016
  80,053
Adjusted assets (=assets-cash), $m
  880
  1,244
  1,714
  2,306
  3,033
  3,908
  4,944
  6,147
  7,525
  9,081
  10,815
  12,728
  14,819
  17,083
  19,518
  22,119
  24,883
  27,805
  30,884
  34,115
  37,498
  41,033
  44,719
  48,557
  52,552
  56,705
  61,022
  65,509
  70,171
  75,016
  80,053
Revenue / Adjusted assets
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
Average production assets, $m
  90
  127
  174
  234
  308
  397
  503
  625
  765
  923
  1,099
  1,294
  1,506
  1,737
  1,984
  2,249
  2,529
  2,827
  3,139
  3,468
  3,812
  4,171
  4,546
  4,936
  5,342
  5,764
  6,203
  6,659
  7,133
  7,626
  8,138
Working capital, $m
  292
  -259
  -357
  -480
  -631
  -813
  -1,029
  -1,279
  -1,566
  -1,890
  -2,251
  -2,649
  -3,084
  -3,555
  -4,062
  -4,603
  -5,178
  -5,786
  -6,427
  -7,099
  -7,804
  -8,539
  -9,306
  -10,105
  -10,936
  -11,801
  -12,699
  -13,633
  -14,603
  -15,611
  -16,659
Total debt, $m
  314
  496
  919
  1,451
  2,105
  2,894
  3,826
  4,909
  6,149
  7,548
  9,110
  10,832
  12,713
  14,751
  16,942
  19,283
  21,771
  24,401
  27,171
  30,080
  33,124
  36,305
  39,623
  43,078
  46,673
  50,411
  54,296
  58,334
  62,530
  66,890
  71,424
Total liabilities, $m
  939
  1,120
  1,543
  2,075
  2,729
  3,518
  4,450
  5,533
  6,773
  8,172
  9,734
  11,456
  13,337
  15,375
  17,566
  19,907
  22,395
  25,025
  27,795
  30,704
  33,748
  36,929
  40,247
  43,702
  47,297
  51,035
  54,920
  58,958
  63,154
  67,514
  72,048
Total equity, $m
  429
  124
  171
  231
  303
  391
  494
  615
  753
  908
  1,082
  1,273
  1,482
  1,708
  1,952
  2,212
  2,488
  2,781
  3,088
  3,412
  3,750
  4,103
  4,472
  4,856
  5,255
  5,671
  6,102
  6,551
  7,017
  7,502
  8,005
Total liabilities and equity, $m
  1,368
  1,244
  1,714
  2,306
  3,032
  3,909
  4,944
  6,148
  7,526
  9,080
  10,816
  12,729
  14,819
  17,083
  19,518
  22,119
  24,883
  27,806
  30,883
  34,116
  37,498
  41,032
  44,719
  48,558
  52,552
  56,706
  61,022
  65,509
  70,171
  75,016
  80,053
Debt-to-equity ratio
  0.732
  3.990
  5.360
  6.290
  6.940
  7.400
  7.740
  7.980
  8.170
  8.310
  8.420
  8.510
  8.580
  8.630
  8.680
  8.720
  8.750
  8.780
  8.800
  8.820
  8.830
  8.850
  8.860
  8.870
  8.880
  8.890
  8.900
  8.900
  8.910
  8.920
  8.920
Adjusted equity ratio
  -0.066
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  136
  183
  253
  338
  441
  565
  712
  881
  1,075
  1,294
  1,537
  1,812
  2,104
  2,421
  2,760
  3,123
  3,508
  3,914
  4,343
  4,792
  5,262
  5,753
  6,265
  6,798
  7,352
  7,929
  8,528
  9,150
  9,797
  10,470
  11,169
Depreciation, amort., depletion, $m
  29
  30
  37
  47
  59
  73
  90
  110
  133
  158
  187
  209
  243
  280
  320
  363
  408
  456
  506
  559
  615
  673
  733
  796
  862
  930
  1,001
  1,074
  1,151
  1,230
  1,313
Funds from operations, $m
  197
  212
  291
  385
  500
  639
  802
  991
  1,208
  1,452
  1,724
  2,021
  2,347
  2,701
  3,080
  3,486
  3,916
  4,370
  4,849
  5,351
  5,877
  6,426
  6,998
  7,594
  8,214
  8,858
  9,528
  10,224
  10,948
  11,700
  12,482
Change in working capital, $m
  7
  -76
  -98
  -123
  -151
  -182
  -215
  -250
  -287
  -324
  -361
  -398
  -435
  -471
  -507
  -541
  -575
  -608
  -641
  -672
  -704
  -736
  -767
  -799
  -831
  -864
  -898
  -934
  -970
  -1,008
  -1,048
Cash from operations, $m
  190
  349
  389
  508
  651
  821
  1,017
  1,242
  1,495
  1,776
  2,085
  2,419
  2,782
  3,172
  3,587
  4,027
  4,491
  4,979
  5,490
  6,024
  6,581
  7,161
  7,765
  8,393
  9,045
  9,723
  10,427
  11,158
  11,918
  12,708
  13,530
Maintenance CAPEX, $m
  0
  -14
  -20
  -28
  -38
  -50
  -64
  -81
  -101
  -123
  -149
  -177
  -209
  -243
  -280
  -320
  -363
  -408
  -456
  -506
  -559
  -615
  -673
  -733
  -796
  -862
  -930
  -1,001
  -1,074
  -1,151
  -1,230
New CAPEX, $m
  -69
  -37
  -48
  -60
  -74
  -89
  -105
  -122
  -140
  -158
  -176
  -195
  -212
  -230
  -248
  -264
  -281
  -297
  -313
  -328
  -344
  -359
  -375
  -390
  -406
  -422
  -439
  -456
  -474
  -493
  -512
Cash from investing activities, $m
  -84
  -51
  -68
  -88
  -112
  -139
  -169
  -203
  -241
  -281
  -325
  -372
  -421
  -473
  -528
  -584
  -644
  -705
  -769
  -834
  -903
  -974
  -1,048
  -1,123
  -1,202
  -1,284
  -1,369
  -1,457
  -1,548
  -1,644
  -1,742
Free cash flow, $m
  106
  297
  320
  420
  540
  682
  848
  1,039
  1,254
  1,494
  1,760
  2,047
  2,361
  2,699
  3,059
  3,442
  3,847
  4,274
  4,721
  5,189
  5,678
  6,187
  6,717
  7,269
  7,843
  8,439
  9,058
  9,702
  10,370
  11,065
  11,788
Issuance/(repayment) of debt, $m
  0
  194
  423
  532
  654
  788
  932
  1,083
  1,240
  1,400
  1,561
  1,722
  1,881
  2,038
  2,191
  2,341
  2,487
  2,630
  2,770
  2,908
  3,045
  3,181
  3,317
  3,455
  3,595
  3,738
  3,885
  4,038
  4,196
  4,361
  4,533
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  4
  194
  423
  532
  654
  788
  932
  1,083
  1,240
  1,400
  1,561
  1,722
  1,881
  2,038
  2,191
  2,341
  2,487
  2,630
  2,770
  2,908
  3,045
  3,181
  3,317
  3,455
  3,595
  3,738
  3,885
  4,038
  4,196
  4,361
  4,533
Total cash flow (excl. dividends), $m
  91
  491
  743
  952
  1,194
  1,470
  1,780
  2,122
  2,494
  2,894
  3,321
  3,769
  4,242
  4,737
  5,251
  5,784
  6,335
  6,904
  7,491
  8,097
  8,722
  9,368
  10,035
  10,724
  11,438
  12,177
  12,943
  13,739
  14,566
  15,426
  16,321
Retained Cash Flow (-), $m
  -90
  -170
  -47
  -59
  -73
  -88
  -104
  -120
  -138
  -156
  -173
  -191
  -209
  -226
  -243
  -260
  -276
  -292
  -308
  -323
  -338
  -353
  -369
  -384
  -399
  -415
  -432
  -449
  -466
  -485
  -504
Prev. year cash balance distribution, $m
 
  475
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  796
  696
  892
  1,121
  1,383
  1,676
  2,001
  2,356
  2,739
  3,147
  3,578
  4,033
  4,510
  5,007
  5,523
  6,058
  6,612
  7,183
  7,774
  8,384
  9,014
  9,666
  10,340
  11,038
  11,762
  12,512
  13,291
  14,100
  14,941
  15,817
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  763
  637
  777
  923
  1,072
  1,217
  1,352
  1,473
  1,573
  1,650
  1,699
  1,721
  1,715
  1,681
  1,622
  1,540
  1,439
  1,323
  1,197
  1,065
  932
  802
  678
  562
  458
  365
  285
  218
  163
  119
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

MercadoLibre, Inc. hosts online commerce platforms in Latin America. It offers MercadoLibre Marketplace, an automated online e-commerce service for businesses and individuals to list items and conduct their sales and purchases online in a fixed-price or auction-based format. The company’s MercadoLibre marketplace enables commerce through online classifieds for motor vehicles, vessels, aircraft, services, and real estate; and Internet users to browse through various products that are listed on its Website and to register with MercadoLibre to list, bid for, and purchase items and services. It also provides MercadoLibre Classifieds service for users to list their offerings related to vehicles, real estate, and services outside the marketplace platform; and MercadoPago, an integrated online payments solution to facilitate transactions on and off the MercadoLibre marketplace by providing a mechanism that allows its users to send, receive, and finance payments online. In addition, the company offers MercadoLibre Advertising program that allows retailers, small and medium brands, and various consumer brands to promote their products and services on the Internet; and enables users and advertisers to place display and text advertisements on its Website to promote their brands and offerings. Further, it provides MercadoShops on-line stores, a software-as-a-service, which allows users to set-up, manage, and promote their own online Webstores; and MercadoEnvios, a shipping solution for marketplace users. As of December 31, 2015, the company operated online commerce platforms directed towards Argentina, Brazil, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, Mexico, Panama, Peru, Portugal, Uruguay, and Venezuela; and a real estate classified platform that covers various areas in Florida. The company was founded in 1999 and is headquartered in Vicente López, Argentina.

FINANCIAL RATIOS  of  MercadoLibre (MELI)

Valuation Ratios
P/E Ratio 72.7
Price to Sales 11.7
Price to Book 23
Price to Tangible Book
Price to Cash Flow 52
Price to Free Cash Flow 81.7
Growth Rates
Sales Growth Rate 29.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 68.3%
Cap. Spend. - 3 Yr. Gr. Rate -9.6%
Financial Strength
Quick Ratio 41
Current Ratio 0
LT Debt to Equity 70.4%
Total Debt to Equity 73.2%
Interest Coverage 24
Management Effectiveness
Return On Assets 12%
Ret/ On Assets - 3 Yr. Avg. 11%
Return On Total Capital 19.7%
Ret/ On T. Cap. - 3 Yr. Avg. 17%
Return On Equity 35.4%
Return On Equity - 3 Yr. Avg. 28.9%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 63.6%
Gross Margin - 3 Yr. Avg. 67.4%
EBITDA Margin 26.3%
EBITDA Margin - 3 Yr. Avg. 26.6%
Operating Margin 21.4%
Oper. Margin - 3 Yr. Avg. 21.5%
Pre-Tax Margin 21.9%
Pre-Tax Margin - 3 Yr. Avg. 22.3%
Net Profit Margin 16.1%
Net Profit Margin - 3 Yr. Avg. 15.2%
Effective Tax Rate 26.5%
Eff/ Tax Rate - 3 Yr. Avg. 32%
Payout Ratio 17.6%

MELI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MELI stock intrinsic value calculation we used $844 million for the last fiscal year's total revenue generated by MercadoLibre. The default revenue input number comes from 2016 income statement of MercadoLibre. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our MELI stock valuation model: a) initial revenue growth rate of 41.4% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for MELI is calculated based on our internal credit rating of MercadoLibre, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of MercadoLibre.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of MELI stock the variable cost ratio is equal to 78.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $4 million in the base year in the intrinsic value calculation for MELI stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for MercadoLibre.

Corporate tax rate of 27% is the nominal tax rate for MercadoLibre. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the MELI stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for MELI are equal to 10.6%.

Life of production assets of 6.2 years is the average useful life of capital assets used in MercadoLibre operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for MELI is equal to -21.7%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $429 million for MercadoLibre - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 43.931 million for MercadoLibre is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of MercadoLibre at the current share price and the inputted number of shares is $9.8 billion.


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Stock chart of MELI Financial statements of MELI
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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