Intrinsic value of MercadoLibre, Inc. - MELI

Previous Close

$492.00

  Intrinsic Value

$104.20

stock screener

  Rating & Target

str. sell

-79%

Previous close

$492.00

 
Intrinsic value

$104.20

 
Up/down potential

-79%

 
Rating

str. sell

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 0001), $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 22.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  19.50
  18.05
  16.75
  15.57
  14.51
  13.56
  12.71
  11.94
  11.24
  10.62
  10.06
  9.55
  9.10
  8.69
  8.32
  7.99
  7.69
  7.42
  7.18
  6.96
  6.76
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
  5.84
  5.76
  5.68
Revenue, $m
  1,721
  2,031
  2,372
  2,741
  3,139
  3,564
  4,017
  4,497
  5,002
  5,533
  6,090
  6,671
  7,278
  7,910
  8,568
  9,252
  9,963
  10,702
  11,471
  12,269
  13,098
  13,961
  14,859
  15,793
  16,765
  17,778
  18,833
  19,933
  21,081
  22,279
Variable operating expenses, $m
  1,638
  1,932
  2,253
  2,602
  2,978
  3,381
  3,809
  4,263
  4,741
  5,243
  5,758
  6,308
  6,882
  7,480
  8,102
  8,749
  9,421
  10,120
  10,846
  11,601
  12,386
  13,201
  14,050
  14,933
  15,852
  16,810
  17,808
  18,848
  19,934
  21,067
Fixed operating expenses, $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
Total operating expenses, $m
  1,638
  1,932
  2,253
  2,602
  2,978
  3,381
  3,809
  4,263
  4,741
  5,243
  5,758
  6,308
  6,882
  7,480
  8,102
  8,749
  9,421
  10,120
  10,846
  11,601
  12,386
  13,201
  14,050
  14,933
  15,852
  16,810
  17,808
  18,848
  19,934
  21,067
Operating income, $m
  83
  100
  118
  138
  160
  183
  208
  234
  262
  290
  331
  363
  396
  431
  466
  504
  542
  583
  624
  668
  713
  760
  809
  860
  913
  968
  1,025
  1,085
  1,147
  1,213
EBITDA, $m
  136
  161
  188
  217
  248
  282
  318
  356
  396
  438
  482
  528
  576
  626
  678
  732
  789
  847
  908
  971
  1,037
  1,105
  1,176
  1,250
  1,327
  1,407
  1,491
  1,578
  1,669
  1,764
Interest expense (income), $m
  8
  75
  113
  155
  201
  250
  304
  361
  423
  487
  555
  627
  702
  780
  862
  947
  1,036
  1,128
  1,224
  1,324
  1,428
  1,535
  1,647
  1,763
  1,884
  2,010
  2,141
  2,278
  2,420
  2,569
  2,723
Earnings before tax, $m
  8
  -13
  -36
  -62
  -90
  -121
  -154
  -189
  -226
  -265
  -296
  -339
  -384
  -432
  -481
  -533
  -586
  -642
  -700
  -760
  -822
  -887
  -955
  -1,025
  -1,098
  -1,174
  -1,253
  -1,335
  -1,421
  -1,511
Tax expense, $m
  2
  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
Net income, $m
  6
  -13
  -36
  -62
  -90
  -121
  -154
  -189
  -226
  -265
  -296
  -339
  -384
  -432
  -481
  -533
  -586
  -642
  -700
  -760
  -822
  -887
  -955
  -1,025
  -1,098
  -1,174
  -1,253
  -1,335
  -1,421
  -1,511

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  2,676
  3,159
  3,688
  4,263
  4,881
  5,543
  6,248
  6,993
  7,779
  8,605
  9,471
  10,375
  11,319
  12,302
  13,325
  14,389
  15,495
  16,645
  17,839
  19,080
  20,371
  21,713
  23,108
  24,561
  26,073
  27,648
  29,289
  31,001
  32,786
  34,649
Adjusted assets (=assets-cash), $m
  2,676
  3,159
  3,688
  4,263
  4,881
  5,543
  6,248
  6,993
  7,779
  8,605
  9,471
  10,375
  11,319
  12,302
  13,325
  14,389
  15,495
  16,645
  17,839
  19,080
  20,371
  21,713
  23,108
  24,561
  26,073
  27,648
  29,289
  31,001
  32,786
  34,649
Revenue / Adjusted assets
  0.643
  0.643
  0.643
  0.643
  0.643
  0.643
  0.643
  0.643
  0.643
  0.643
  0.643
  0.643
  0.643
  0.643
  0.643
  0.643
  0.643
  0.643
  0.643
  0.643
  0.643
  0.643
  0.643
  0.643
  0.643
  0.643
  0.643
  0.643
  0.643
  0.643
Average production assets, $m
  234
  276
  323
  373
  427
  485
  546
  612
  680
  753
  828
  907
  990
  1,076
  1,165
  1,258
  1,355
  1,456
  1,560
  1,669
  1,781
  1,899
  2,021
  2,148
  2,280
  2,418
  2,561
  2,711
  2,867
  3,030
Working capital, $m
  -650
  -768
  -896
  -1,036
  -1,186
  -1,347
  -1,518
  -1,700
  -1,891
  -2,092
  -2,302
  -2,522
  -2,751
  -2,990
  -3,239
  -3,497
  -3,766
  -4,046
  -4,336
  -4,638
  -4,951
  -5,277
  -5,617
  -5,970
  -6,337
  -6,720
  -7,119
  -7,535
  -7,969
  -8,422
Total debt, $m
  1,107
  1,518
  1,967
  2,456
  2,981
  3,544
  4,143
  4,777
  5,445
  6,147
  6,882
  7,651
  8,453
  9,289
  10,159
  11,063
  12,003
  12,980
  13,996
  15,051
  16,148
  17,288
  18,474
  19,709
  20,994
  22,333
  23,728
  25,183
  26,700
  28,284
Total liabilities, $m
  2,275
  2,685
  3,135
  3,623
  4,149
  4,712
  5,310
  5,944
  6,612
  7,315
  8,050
  8,819
  9,621
  10,457
  11,326
  12,231
  13,171
  14,148
  15,163
  16,218
  17,315
  18,456
  19,642
  20,877
  22,162
  23,501
  24,896
  26,351
  27,868
  29,452
Total equity, $m
  401
  474
  553
  639
  732
  831
  937
  1,049
  1,167
  1,291
  1,421
  1,556
  1,698
  1,845
  1,999
  2,158
  2,324
  2,497
  2,676
  2,862
  3,056
  3,257
  3,466
  3,684
  3,911
  4,147
  4,393
  4,650
  4,918
  5,197
Total liabilities and equity, $m
  2,676
  3,159
  3,688
  4,262
  4,881
  5,543
  6,247
  6,993
  7,779
  8,606
  9,471
  10,375
  11,319
  12,302
  13,325
  14,389
  15,495
  16,645
  17,839
  19,080
  20,371
  21,713
  23,108
  24,561
  26,073
  27,648
  29,289
  31,001
  32,786
  34,649
Debt-to-equity ratio
  2.760
  3.200
  3.560
  3.840
  4.070
  4.260
  4.420
  4.550
  4.670
  4.760
  4.840
  4.920
  4.980
  5.030
  5.080
  5.130
  5.160
  5.200
  5.230
  5.260
  5.280
  5.310
  5.330
  5.350
  5.370
  5.390
  5.400
  5.420
  5.430
  5.440
Adjusted equity ratio
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  6
  -13
  -36
  -62
  -90
  -121
  -154
  -189
  -226
  -265
  -296
  -339
  -384
  -432
  -481
  -533
  -586
  -642
  -700
  -760
  -822
  -887
  -955
  -1,025
  -1,098
  -1,174
  -1,253
  -1,335
  -1,421
  -1,511
Depreciation, amort., depletion, $m
  53
  61
  69
  78
  88
  99
  110
  122
  134
  148
  151
  165
  180
  196
  212
  229
  246
  265
  284
  303
  324
  345
  367
  391
  415
  440
  466
  493
  521
  551
Funds from operations, $m
  59
  48
  33
  16
  -2
  -22
  -44
  -67
  -91
  -117
  -145
  -174
  -204
  -236
  -269
  -304
  -340
  -377
  -416
  -456
  -498
  -542
  -587
  -634
  -683
  -734
  -787
  -842
  -900
  -960
Change in working capital, $m
  -106
  -117
  -129
  -140
  -150
  -161
  -171
  -181
  -191
  -201
  -210
  -220
  -229
  -239
  -249
  -259
  -269
  -279
  -290
  -302
  -314
  -326
  -339
  -353
  -368
  -383
  -399
  -416
  -434
  -453
Cash from operations, $m
  165
  165
  161
  156
  148
  139
  128
  115
  100
  83
  65
  46
  25
  3
  -21
  -45
  -71
  -98
  -126
  -155
  -185
  -216
  -248
  -281
  -316
  -351
  -388
  -426
  -466
  -507
Maintenance CAPEX, $m
  -36
  -43
  -50
  -59
  -68
  -78
  -88
  -99
  -111
  -124
  -137
  -151
  -165
  -180
  -196
  -212
  -229
  -246
  -265
  -284
  -303
  -324
  -345
  -367
  -391
  -415
  -440
  -466
  -493
  -521
New CAPEX, $m
  -38
  -42
  -46
  -50
  -54
  -58
  -62
  -65
  -69
  -72
  -76
  -79
  -83
  -86
  -89
  -93
  -97
  -101
  -104
  -109
  -113
  -117
  -122
  -127
  -132
  -138
  -144
  -150
  -156
  -163
Cash from investing activities, $m
  -74
  -85
  -96
  -109
  -122
  -136
  -150
  -164
  -180
  -196
  -213
  -230
  -248
  -266
  -285
  -305
  -326
  -347
  -369
  -393
  -416
  -441
  -467
  -494
  -523
  -553
  -584
  -616
  -649
  -684
Free cash flow, $m
  92
  80
  65
  47
  26
  3
  -22
  -50
  -80
  -113
  -147
  -184
  -222
  -263
  -306
  -350
  -396
  -445
  -495
  -547
  -601
  -657
  -715
  -776
  -838
  -904
  -971
  -1,042
  -1,115
  -1,191
Issuance/(repayment) of debt, $m
  372
  411
  450
  488
  526
  563
  599
  634
  668
  702
  736
  769
  802
  836
  870
  904
  940
  977
  1,015
  1,055
  1,097
  1,140
  1,186
  1,235
  1,285
  1,339
  1,395
  1,455
  1,517
  1,584
Issuance/(repurchase) of shares, $m
  59
  86
  116
  148
  183
  220
  259
  300
  344
  389
  425
  475
  526
  579
  635
  692
  752
  814
  879
  946
  1,016
  1,088
  1,164
  1,243
  1,325
  1,410
  1,499
  1,592
  1,689
  1,790
Cash from financing (excl. dividends), $m  
  431
  497
  566
  636
  709
  783
  858
  934
  1,012
  1,091
  1,161
  1,244
  1,328
  1,415
  1,505
  1,596
  1,692
  1,791
  1,894
  2,001
  2,113
  2,228
  2,350
  2,478
  2,610
  2,749
  2,894
  3,047
  3,206
  3,374
Total cash flow (excl. dividends), $m
  522
  577
  630
  683
  735
  786
  836
  884
  932
  978
  1,014
  1,060
  1,105
  1,152
  1,199
  1,247
  1,296
  1,347
  1,399
  1,454
  1,512
  1,572
  1,635
  1,701
  1,771
  1,845
  1,923
  2,005
  2,091
  2,183
Retained Cash Flow (-), $m
  -65
  -86
  -116
  -148
  -183
  -220
  -259
  -300
  -344
  -389
  -425
  -475
  -526
  -579
  -635
  -692
  -752
  -814
  -879
  -946
  -1,016
  -1,088
  -1,164
  -1,243
  -1,325
  -1,410
  -1,499
  -1,592
  -1,689
  -1,790
Prev. year cash balance distribution, $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 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
  458
  491
  515
  535
  552
  566
  577
  584
  588
  590
  588
  585
  580
  573
  564
  554
  544
  532
  521
  508
  496
  483
  471
  459
  447
  435
  424
  413
  402
  393
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
  439
  450
  448
  441
  428
  411
  390
  365
  338
  309
  279
  250
  220
  192
  166
  141
  118
  98
  80
  65
  51
  40
  31
  23
  17
  13
  9
  6
  4
  3
Current shareholders' claim on cash, %
  98.3
  96.2
  93.9
  91.5
  88.9
  86.3
  83.7
  81.1
  78.6
  76.0
  73.6
  71.2
  68.9
  66.6
  64.4
  62.2
  60.2
  58.1
  56.1
  54.2
  52.4
  50.6
  48.8
  47.1
  45.5
  43.9
  42.4
  40.9
  39.5
  38.1

MercadoLibre, Inc. is an e-commerce company. The Company enables commerce through its marketplace platform in Latin America, which is designed to provide users with a portfolio of services to facilitate commercial transactions. Its geographic segments are Brazil, Argentina, Mexico Venezuela and Other Countries (which includes Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, Panama, Peru, Portugal, Guatemala, Bolivia, Paraguay, Uruguay and the United States of America). It also operates online commerce platforms in the Dominican Republic, Honduras, Nicaragua, Salvador, Panama, Bolivia, Guatemala, Paraguay and Portugal. It offers an ecosystem of six integrated e-commerce services: the MercadoLibre Marketplace, the MercadoLibre Classifieds Service, the MercadoPago payments solution, the MercadoLibre advertising program, the MercadoShops online Webstores solution and the MercadoEnvios shipping service.

FINANCIAL RATIOS  of  MercadoLibre, Inc. (MELI)

Valuation Ratios
P/E Ratio 159.8
Price to Sales 25.7
Price to Book 50.6
Price to Tangible Book
Price to Cash Flow 114.4
Price to Free Cash Flow 192.3
Growth Rates
Sales Growth Rate 29.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 20.3%
Cap. Spend. - 3 Yr. Gr. Rate -7.5%
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 $1440 million for the last fiscal year's total revenue generated by MercadoLibre, Inc.. The default revenue input number comes from 0001 income statement of MercadoLibre, Inc.. 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 19.5% 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, Inc., 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, Inc..
    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 95.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 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 10.2% for MercadoLibre, Inc..

Corporate tax rate of 27% is the nominal tax rate for MercadoLibre, Inc.. 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 13.6%.

Life of production assets of 5.5 years is the average useful life of capital assets used in MercadoLibre, Inc. 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 -37.8%. 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 - $336.7 million for MercadoLibre, Inc. - 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 45.199 million for MercadoLibre, Inc. 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, Inc. at the current share price and the inputted number of shares is $22.2 billion.

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