Motley Fool: MercadoLibre is an e-commerce and digital payment giant

MercadoLibre (Nasdaq: MELI) is an e-commerce giant in the fastgrowing Latin American market that helps people acquire goods and pay for them, too. It recently operated in 18 countries and boasted 83 million monthly active users. Over the past 12 months, its shares were down 36%. Despite some challenges, though, there are good reasons to consider buying and holding MercadoLibre.

For starters, it’s growing briskly. In the first quarter, MercadoLibre’s revenue grew by 49% year over year to $8.8 billion. That’s impressive, but its profit margins and profits declined meaningfully. Why? Well, it has been facing stiff competition and has chosen to sacrifice short-term margins and profits to extend initiatives that may pay off handsomely. For example, it lowered the threshold for free shipping in Brazil, which is resulting in greater sales volume. That may help MercadoLibre scale up its higher-profit-margin advertising business.

MercadoLibre is also home to a major “fintech” (financial technology) company, Mercado Pago, which is pursuing growth opportunities such as expanded credit card offerings. Many of the people in the markets it serves are underbanked, providing another major growth opportunity.

Shares of MercadoLibre appear fairly valued or undervalued at current levels and could deliver strong longterm returns to investors who buy today. (The Motley Fool owns shares of and recommends MercadoLibre.)

Q. Are there any quick and easy ways to figure out if a company is over- or undervalued? – P.M., Hickory, North Carolina

A. Even if you undertake many calculations, it’s hard, if not impossible, to determine for sure what a stock is really worth – and, therefore, whether it’s over- or undervalued. Even smart stock analysts will likely arrive at different numbers for any company they study because they all make different assumptions, such as the company’s growth rate.

Still, there are indeed some quick and easy ways to get a rough idea of valuation. One is the price-to-earnings (P/E) ratio, dividing a company’s stock price by its annual earnings per share (EPS); it can sometimes be helpful to use the EPS expected over the coming year. A low P/E suggests a low valuation, though it’s smart to compare it with peers’ P/E ratios and its own five-year P/E range. The P/E shows how much you’d be paying for each dollar of earnings.

You might also check out the price-to-sales (P/S) ratio, which divides the company’s market capitalization (its market value – the total value of all its shares outstanding) by its annual revenue (sales). This is especially handy when a company has posted losses rather than profits, making the P/E ratio moot. The P/S shows how much you’d be paying for each dollar of revenue.

Q. Where can I see how quickly home values are rising in my area? – S.R., Honolulu

A. At sites such as EyeOnHousing.org, Realtor.com/research and Zillow.com/homevalues, you can look up home price growth rates for the U.S., each state and/or many counties and metropolitan regions. Good real estate agents can supply such info, too.

My dumbest investment

My most regrettable investment move was not investing in a time machine so I could go back to the late 1990s and buy stock in Apple!

Actually, my most regrettable move was about 20 years ago; I listened to a friend who’d had modest success in the stock market, and he casually mentioned Silicon Graphics (SGI) as a smart buy. We all know what happened then: stiff competition, rapid market share contraction, the stock nose-diving, then Chapter 11 bankruptcy. The lesson: Friends are good for friendship, not stock advice! – J.S., Mountain View, California

The Fool Responds: We’d love to have bought a time machine, too – a $10,000 stake in Apple in mid-1999 would be worth more than $7 million today!

Your friend steered you wrong, but each of us should do our own research into any recommended company before buying. Don’t assume that anyone will be prescient about any given stock.

Also, if you’re going to invest in individual stocks, you must accept that some will disappoint you. To minimize losses, try to keep up with your holdings so that you can notice when a company is struggling. At such times, determine whether the problems seem to be temporary or long-lasting, and then decide whether to hang on or sell. Selling for a loss can hurt, but it’s better than experiencing a bigger loss. And there are always other attractive stocks to move money into.

Do you have a smart or regrettable investment move to share with us? Email it to TMFShare@fool.com.