If you're like me, you missed the more than 1,500% run in MercadoLibre (NASDAQ:MELI) stock over the last decade. While there have been plenty of other investments that have provided massive upside, Latin America's e-commerce and digital payments leader has been an especially big winner as the digital age sweeps across the globe.

As much as it's grown, though, MercadoLibre's current market capitalization values it at just shy of $41 billion -- a large business to be sure but not so large that it's run out of stock market-beating potential. It likely won't turn an investor into a millionaire all by itself at this point, but there is plenty left to like about this stock.  

An underserved quadrant of the globe

MercadoLibre operates in 18 countries in Latin America, and based on visits to its online marketplace, it ranks as the largest consumer-centric e-commerce site in each of those countries. Latin America has about 650 million residents, so there's no shortage of potential customers. While online retail has grown all but ubiquitous in the U.S. (although even there it's still a high-growth industry), access to and use of the internet is rising fast south of the border.  

According to researcher eMarketer, retail e-commerce made up only about 4% of the total spent last year in Latin America. It's a fast-growing industry -- expected to have grown about 20% in 2019, totaling some $71 billion in consumer spend -- and one that MercadoLibre is pioneering. The company's total revenue increased 59% in 2019 to $2.30 billion, and much like other e-commerce companies, demand for its services remained high during the coronavirus lockdown. First-quarter 2020 revenue increased 38% to $652 million, and management said that growth in April was trending higher than it was before the pandemic.

A young woman holding a smartphone and credit card.

Image source: Getty Images.

Growing on two fronts

MercadoLibre is actually a tale of two businesses: its online marketplace and supporting services like shipping and ads (about 70% of revenue), and financial technology and payments (everything else). E-commerce grew 33% in the first quarter, but the fintech segment is catching up and notched a 45% year-over-year growth rate to start 2020.

Digital retail services will remain the primary segment at MercadoLibre for some time, but its various financial services could be the item that helps maintain the company's momentum long term. Just as its online marketplace helped democratize retail in Latin America, its fintech arm is delivering basic services where before there were none. Many consumers in Central and South America are underserved by the banking industry and don't have access to checking or savings. Cash transactions are still king -- for now. But via its various services under Mercado Pago, households can leapfrog legacy banks and now have access to an online wallet, digital payments, consumer credit, and asset management.  

MercadoLibre invests heavily in marketing and development to promote growth, but it's well funded to continue executing. Over the last 12 months, free cash flow (revenue less cash operating and capital expenses) was positive $78 million. Cash and short-term investments on the balance sheet totaled $2.63 billion and debt just $933 million.  

Paying a premium

For its fast growth and resiliency in this time of crisis, MercadoLibre isn't exactly cheap. There are few profits to speak of, but that's because expansion is the name of the game for the foreseeable future. But at 16.6 times trailing one-year revenue, it isn't a terrible deal. North American peer Shopify is putting up similar revenue growth numbers and has a similar mission to bring the power of digital commerce to all, but its stock trades for an astounding 51.4 times trailing 12-month sales as of this writing.  

MercadoLibre shares have skyrocketed over the last decade, but e-commerce is still a young industry -- especially in Latin America. For investors who think digital commerce has legs in the next decade ahead, this is a good one to consider.