Foolish Forecast: Catching MercadoLibre Early

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This miercoles por la noche -- Wednesday night, for us Anglophiles -- we're getting a first-quarter earnings report all the way from Argentina. It's MercadoLibre (Nasdaq: MELI), the biggest online auction outfit in Latin America, and this Fool has swapped his jingly cap for a gaucho hat to prepare for the report.

What Fools say:
Here's how MercadoLibre's CAPS rating stacks up against some of its peers and competitors:

	Market Cap (millions)	Trailing P/E Ratio	CAPS Rating
eBay (Nasdaq: EBAY)	$35,130	102.6	***
Amazon.com (Nasdaq: AMZN)	$26,130	55.8	**
Mercadolibre	$1,660	204.2	****
Gmarket (Nasdaq: GMKT)	$1,130	32.4	****
Liquidity Services (Nasdaq: LQDT)	$264	24.0	***

Data taken from Motley Fool CAPS and Yahoo! Finance on 03/03/2008.

Marching ahead of the pack, shoulder-to-shoulder with South Korean counterpart Gmarket, the company shows us the appeal of localized auction houses -- Rioplatense villas and Joseon pagodas alike.

Simply put, the CAPS bulls on this stock see the early days of eBay playing out all over again, and predict a similar skyrocketing business trajectory. The 'Bay or Amazon are mentioned many times over as prospective buyers of the whole company, and it's also a way to tap into the rampant growth we're seeing out of Latin America these days.

The bears point to (surprise!) unreasonable valuation -- even after a 54% price cut in the last two months.

What management does:
The operating margin trend is the real story here. The company is accelerating the share of operating profits quarter by quarter, while doing the same in sales growth.

Margins	6/2006	9/2006	12/2006	3/2007	6/2007	9/2007
Gross	78.3%	78.3%	76.8%	77.2%	77.4%	77.6%
Operating	2.9%	2.9%	10.4%	13.1%	16.9%	21.3%
Net	8.3%	8.3%	2.1%	3.4%	5.4%	8.4%
FCF/Revenue	7%	7%	7.8%	12.6%	11.2%	10.1%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Any Fool would relish the chance to get in on the next eBay in its early growth stages. For its leading market position in a high-margin business with powerful network effects, MercadoLibre made a spirited run for the title of best international stock for 2008, but eventually lost out to Cemex (NYSE: CX) and Sadia (NYSE: SDA). Nothing much has changed since then -- after all, the vote ended just three weeks ago. MercadoLibre is still a brilliant little company with oceans of growth ahead of it.

Will it be enough to justify the lofty stock price? It's hard to tell with such a short operating history, but Mercado does have the expertise of its more than 10% ownership by eBay to fall back on. Patience is a virtue, Fool.

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