Intrinsic value of MercadoLibre - MELI

Previous Close

$235.73

  Intrinsic Value

$1,970

stock screener

  Rating & Target

str. buy

+736%

Previous close

$235.73

 
Intrinsic value

$1,970

 
Up/down potential

+736%

 
Rating

str. buy

*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 10.4

 

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
  58.50
  53.15
  48.34
  44.00
  40.10
  36.59
  33.43
  30.59
  28.03
  25.73
  23.65
  21.79
  20.11
  18.60
  17.24
  16.02
  14.91
  13.92
  13.03
  12.23
  11.50
  10.85
  10.27
  9.74
  9.27
  8.84
  8.46
  8.11
  7.80
  7.52
Revenue, $m
  844
  1,338
  2,049
  3,039
  4,376
  6,131
  8,375
  11,174
  14,593
  18,683
  23,489
  29,046
  35,374
  42,488
  50,390
  59,077
  68,539
  78,760
  89,725
  101,417
  113,817
  126,911
  140,686
  155,132
  170,245
  186,022
  202,468
  219,590
  237,401
  255,918
  275,163
Variable operating expenses, $m
 
  1,039
  1,587
  2,350
  3,379
  4,731
  6,458
  8,615
  11,247
  14,397
  18,098
  22,368
  27,242
  32,720
  38,806
  45,495
  52,782
  60,653
  69,098
  78,101
  87,650
  97,734
  108,342
  119,467
  131,105
  143,255
  155,920
  169,106
  182,822
  197,082
  211,903
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
  1,043
  1,591
  2,354
  3,383
  4,736
  6,463
  8,620
  11,252
  14,402
  18,103
  22,373
  27,247
  32,726
  38,812
  45,501
  52,788
  60,659
  69,104
  78,107
  87,657
  97,741
  108,349
  119,474
  131,112
  143,262
  155,928
  169,114
  182,830
  197,090
  211,911
Operating income, $m
  181
  294
  458
  685
  992
  1,396
  1,911
  2,555
  3,341
  4,281
  5,386
  6,672
  8,127
  9,763
  11,579
  13,576
  15,751
  18,101
  20,622
  23,309
  26,160
  29,170
  32,337
  35,658
  39,132
  42,759
  46,540
  50,476
  54,571
  58,827
  63,252
EBITDA, $m
  210
  326
  502
  746
  1,076
  1,510
  2,064
  2,755
  3,599
  4,610
  5,797
  7,169
  8,732
  10,489
  12,441
  14,586
  16,923
  19,447
  22,156
  25,043
  28,106
  31,340
  34,742
  38,310
  42,043
  45,939
  50,001
  54,230
  58,629
  63,203
  67,956
Interest expense (income), $m
  8
  11
  22
  45
  78
  122
  180
  253
  345
  457
  592
  750
  932
  1,140
  1,374
  1,633
  1,919
  2,229
  2,565
  2,925
  3,309
  3,717
  4,147
  4,599
  5,074
  5,570
  6,088
  6,629
  7,191
  7,776
  8,384
Earnings before tax, $m
  185
  284
  436
  640
  914
  1,274
  1,732
  2,302
  2,996
  3,824
  4,794
  5,923
  7,195
  8,622
  10,205
  11,943
  13,832
  15,871
  18,057
  20,384
  22,851
  25,453
  28,190
  31,059
  34,058
  37,189
  40,451
  43,847
  47,380
  51,051
  54,867
Tax expense, $m
  49
  77
  118
  173
  247
  344
  468
  621
  809
  1,032
  1,294
  1,599
  1,943
  2,328
  2,755
  3,225
  3,735
  4,285
  4,875
  5,504
  6,170
  6,872
  7,611
  8,386
  9,196
  10,041
  10,922
  11,839
  12,792
  13,784
  14,814
Net income, $m
  136
  207
  318
  467
  668
  930
  1,264
  1,680
  2,187
  2,791
  3,500
  4,324
  5,252
  6,294
  7,450
  8,718
  10,098
  11,586
  13,181
  14,880
  16,681
  18,581
  20,579
  22,673
  24,863
  27,148
  29,530
  32,009
  34,587
  37,268
  40,053

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
  1,395
  2,136
  3,169
  4,563
  6,393
  8,733
  11,652
  15,216
  19,482
  24,494
  30,287
  36,887
  44,305
  52,545
  61,603
  71,469
  82,127
  93,561
  105,753
  118,683
  132,337
  146,700
  161,764
  177,523
  193,975
  211,124
  228,978
  247,550
  266,859
  286,927
Adjusted assets (=assets-cash), $m
  880
  1,395
  2,136
  3,169
  4,563
  6,393
  8,733
  11,652
  15,216
  19,482
  24,494
  30,287
  36,887
  44,305
  52,545
  61,603
  71,469
  82,127
  93,561
  105,753
  118,683
  132,337
  146,700
  161,764
  177,523
  193,975
  211,124
  228,978
  247,550
  266,859
  286,927
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
  142
  217
  322
  464
  650
  888
  1,184
  1,547
  1,980
  2,490
  3,079
  3,750
  4,504
  5,341
  6,262
  7,265
  8,349
  9,511
  10,750
  12,065
  13,453
  14,913
  16,444
  18,046
  19,718
  21,462
  23,277
  25,164
  27,127
  29,167
Working capital, $m
  292
  -290
  -445
  -659
  -950
  -1,330
  -1,817
  -2,425
  -3,167
  -4,054
  -5,097
  -6,303
  -7,676
  -9,220
  -10,935
  -12,820
  -14,873
  -17,091
  -19,470
  -22,007
  -24,698
  -27,540
  -30,529
  -33,664
  -36,943
  -40,367
  -43,935
  -47,651
  -51,516
  -55,534
  -59,710
Total debt, $m
  314
  631
  1,299
  2,228
  3,483
  5,130
  7,235
  9,863
  13,071
  16,909
  21,420
  26,635
  32,574
  39,250
  46,666
  54,819
  63,698
  73,291
  83,581
  94,553
  106,191
  118,479
  131,406
  144,964
  159,147
  173,953
  189,387
  205,456
  222,171
  239,549
  257,610
Total liabilities, $m
  939
  1,255
  1,923
  2,852
  4,107
  5,754
  7,859
  10,487
  13,695
  17,533
  22,044
  27,259
  33,198
  39,874
  47,290
  55,443
  64,322
  73,915
  84,205
  95,177
  106,815
  119,103
  132,030
  145,588
  159,771
  174,577
  190,011
  206,080
  222,795
  240,173
  258,234
Total equity, $m
  429
  139
  214
  317
  456
  639
  873
  1,165
  1,522
  1,948
  2,449
  3,029
  3,689
  4,430
  5,254
  6,160
  7,147
  8,213
  9,356
  10,575
  11,868
  13,234
  14,670
  16,176
  17,752
  19,397
  21,112
  22,898
  24,755
  26,686
  28,693
Total liabilities and equity, $m
  1,368
  1,394
  2,137
  3,169
  4,563
  6,393
  8,732
  11,652
  15,217
  19,481
  24,493
  30,288
  36,887
  44,304
  52,544
  61,603
  71,469
  82,128
  93,561
  105,752
  118,683
  132,337
  146,700
  161,764
  177,523
  193,974
  211,123
  228,978
  247,550
  266,859
  286,927
Debt-to-equity ratio
  0.732
  4.530
  6.080
  7.030
  7.630
  8.020
  8.290
  8.460
  8.590
  8.680
  8.750
  8.790
  8.830
  8.860
  8.880
  8.900
  8.910
  8.920
  8.930
  8.940
  8.950
  8.950
  8.960
  8.960
  8.960
  8.970
  8.970
  8.970
  8.970
  8.980
  8.980
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
  207
  318
  467
  668
  930
  1,264
  1,680
  2,187
  2,791
  3,500
  4,324
  5,252
  6,294
  7,450
  8,718
  10,098
  11,586
  13,181
  14,880
  16,681
  18,581
  20,579
  22,673
  24,863
  27,148
  29,530
  32,009
  34,587
  37,268
  40,053
Depreciation, amort., depletion, $m
  29
  32
  44
  61
  84
  114
  152
  200
  259
  329
  411
  497
  605
  726
  862
  1,010
  1,172
  1,347
  1,534
  1,734
  1,946
  2,170
  2,405
  2,652
  2,911
  3,180
  3,462
  3,754
  4,059
  4,375
  4,704
Funds from operations, $m
  187
  239
  362
  528
  752
  1,044
  1,417
  1,881
  2,445
  3,120
  3,910
  4,820
  5,857
  7,021
  8,311
  9,728
  11,269
  12,933
  14,715
  16,614
  18,627
  20,751
  22,984
  25,325
  27,773
  30,328
  32,991
  35,763
  38,646
  41,643
  44,758
Change in working capital, $m
  -3
  -107
  -154
  -215
  -290
  -381
  -487
  -608
  -742
  -888
  -1,043
  -1,206
  -1,373
  -1,544
  -1,715
  -1,885
  -2,053
  -2,218
  -2,379
  -2,537
  -2,691
  -2,841
  -2,989
  -3,135
  -3,279
  -3,424
  -3,569
  -3,715
  -3,865
  -4,018
  -4,176
Cash from operations, $m
  190
  346
  516
  743
  1,042
  1,425
  1,904
  2,488
  3,187
  4,007
  4,953
  6,026
  7,230
  8,564
  10,026
  11,613
  13,323
  15,151
  17,095
  19,151
  21,318
  23,592
  25,973
  28,460
  31,053
  33,752
  36,560
  39,478
  42,511
  45,661
  48,934
Maintenance CAPEX, $m
  0
  -14
  -23
  -35
  -52
  -75
  -105
  -143
  -191
  -249
  -319
  -402
  -497
  -605
  -726
  -862
  -1,010
  -1,172
  -1,347
  -1,534
  -1,734
  -1,946
  -2,170
  -2,405
  -2,652
  -2,911
  -3,180
  -3,462
  -3,754
  -4,059
  -4,375
New CAPEX, $m
  -77
  -52
  -75
  -105
  -142
  -186
  -238
  -297
  -362
  -434
  -509
  -589
  -671
  -754
  -838
  -921
  -1,003
  -1,083
  -1,162
  -1,239
  -1,314
  -1,388
  -1,460
  -1,531
  -1,602
  -1,672
  -1,743
  -1,815
  -1,888
  -1,963
  -2,040
Cash from investing activities, $m
  -84
  -66
  -98
  -140
  -194
  -261
  -343
  -440
  -553
  -683
  -828
  -991
  -1,168
  -1,359
  -1,564
  -1,783
  -2,013
  -2,255
  -2,509
  -2,773
  -3,048
  -3,334
  -3,630
  -3,936
  -4,254
  -4,583
  -4,923
  -5,277
  -5,642
  -6,022
  -6,415
Free cash flow, $m
  106
  280
  418
  603
  848
  1,164
  1,561
  2,048
  2,634
  3,324
  4,125
  5,035
  6,063
  7,206
  8,462
  9,831
  11,310
  12,896
  14,586
  16,378
  18,269
  20,258
  22,343
  24,523
  26,798
  29,169
  31,636
  34,202
  36,869
  39,640
  42,518
Issuance/(repayment) of debt, $m
  5
  329
  667
  929
  1,255
  1,647
  2,105
  2,628
  3,208
  3,839
  4,511
  5,214
  5,939
  6,676
  7,416
  8,152
  8,879
  9,593
  10,291
  10,972
  11,637
  12,288
  12,927
  13,558
  14,183
  14,807
  15,434
  16,069
  16,715
  17,378
  18,061
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
  329
  667
  929
  1,255
  1,647
  2,105
  2,628
  3,208
  3,839
  4,511
  5,214
  5,939
  6,676
  7,416
  8,152
  8,879
  9,593
  10,291
  10,972
  11,637
  12,288
  12,927
  13,558
  14,183
  14,807
  15,434
  16,069
  16,715
  17,378
  18,061
Total cash flow (excl. dividends), $m
  91
  609
  1,085
  1,532
  2,103
  2,811
  3,666
  4,676
  5,842
  7,163
  8,635
  10,250
  12,002
  13,882
  15,878
  17,983
  20,189
  22,488
  24,876
  27,350
  29,907
  32,547
  35,271
  38,081
  40,981
  43,976
  47,070
  50,271
  53,584
  57,017
  60,579
Retained Cash Flow (-), $m
  -90
  -185
  -74
  -103
  -139
  -183
  -234
  -292
  -356
  -427
  -501
  -579
  -660
  -742
  -824
  -906
  -987
  -1,066
  -1,143
  -1,219
  -1,293
  -1,365
  -1,436
  -1,506
  -1,576
  -1,645
  -1,715
  -1,785
  -1,857
  -1,931
  -2,007
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
 
  899
  1,011
  1,429
  1,964
  2,628
  3,432
  4,384
  5,485
  6,736
  8,134
  9,670
  11,342
  13,140
  15,054
  17,078
  19,202
  21,422
  23,733
  26,131
  28,614
  31,181
  33,834
  36,575
  39,405
  42,331
  45,355
  48,485
  51,727
  55,086
  58,572
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
 
  861
  926
  1,244
  1,617
  2,037
  2,491
  2,962
  3,428
  3,870
  4,264
  4,592
  4,840
  4,996
  5,054
  5,014
  4,880
  4,661
  4,371
  4,023
  3,636
  3,225
  2,807
  2,397
  2,007
  1,647
  1,323
  1,041
  800
  601
  441
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. 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 (MELI)

Valuation Ratios
P/E Ratio 76.5
Price to Sales 12.3
Price to Book 24.3
Price to Tangible Book
Price to Cash Flow 54.8
Price to Free Cash Flow 92.1
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 $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 58.5% 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, 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 44.161 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 $10.4 billion.

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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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