The e-commerce trend has accelerated as consumers have moved online to buy everyday goods to avoid visiting brick-and-mortar retailers and risk getting exposed to the coronavirus. MercadoLibre's (NASDAQ:MELI) business and its stock have been able to ride this trend, resulting in a market-beating doubling of the company's share price just this year. With the stock close to all-time highs, have prospective investors missed the boat, or do they still have time to get in on the stock and profit?

Let's examine the core business segments of this Latin American e-commerce leader to decide. 

MELI Chart

Mercado Libre stock versus the S&P500 year-to-date through Oct. 9, 2020. MELI data by YCharts

Its e-commerce marketplace provides a solid foundation

MercadoLibre serves a population of 638 million people in 18 countries across Latin America. Consumers in the region are becoming more tech-savvy: More than half have access to the internet, and 200 million have purchased goods online.

But even with the growing adoption of mobile technology, e-commerce activity in 2019 only represented 4.4% of all retail purchases in Latin America, giving this online operator plenty of room to grow.

Founded in 1999, MercadoLibre's marketplace has become the leading e-commerce website for shoppers in the region. In its most recent quarter (Q2 2020), 32 million consumers purchased $5 billion worth of products from four million sellers using the platform. The 179 million items sold marked a 101% increase year over year. Revenues from its commerce segment reached $582 million, an 80% year-over-year increase. Commerce-based revenue includes listing fees from MercadoLibre's online website, shipping services, ad sales, classified fees, and ancillary services.

Part of what makes MercadoLibre the region's e-commerce leader is its robust logistics network, called Mercado Envios. This network has matured such that the company now provides free shipping for buyers in Brazil, Argentina, Mexico, Chile, and Colombia (which make up more than 95% of revenues). But it's not stopping there. It is continuing to invest in its network to provide even more convenience and faster service for its customers.

Canvas bag with dollar sign next to stacks of coins increasing in size with calendar and clock in the background.

Image source: Getty Images.

Payments is a growth engine

In 2003, the company realized it was missing out on additional online sales because customers had no way to pay for products electronically, so it introduced its payment service called Mercado Pago. This service has not only become the primary way shoppers pay for goods on the platform, but it's also become a popular way to buy goods at local shops.

Last quarter, Mercado Pago facilitated 405 million transactions for 52 million people, representing $11.2 billion in goods and services purchased, with more than half of the value spent on off-platform transactions. The local currency transaction value grew at an amazing triple-digit rate year over year.

Second-quarter revenue from its fintech segment hit $297 million, up 34% year over year (86% in local currency). This segment is made up of payment fees, fees from its credit services, and the sale of its point-of-sale devices.

But there's still plenty of upside. With much of the population still largely unbanked or underbanked, it leaves a wide-open opportunity for the company to expand its fintech business even more.

Fintech has a bright future

With the success of its payments offering, management is focused on expanding Mercado Pago to be "a powerful disruptive provider of end-to-end financial technology solutions." It has already made significant strides toward this goal and offers the following services to its core regions:

  • In-store payments through a point-of-sale device or QR code
  • A mobile digital wallet for peer-to-peer payments and paying utility or mobile phone bills
  • Pre-paid and co-branded credit cards
  • Merchant credits on its marketplace
  • A money market fund for investing the cash in customers' mobile wallets

With significant investments in its information technology, this tech-forward E-tailer looks to lead the way with easily accessible online banking solutions as well.

Mercado Libre is a buy

Its growth levers alone make this an attractive stock, but this high-quality business also boasts a solid management team, tons of cash, and a great culture that adds up to make it a buy for patient investors. Even with its lofty price-to-sales ratio of 18 and a forward price-to-earnings ratio of 200, investors with a long-term mindset can buy this stock today, sit back, and enjoy market-beating returns in the decades ahead.

 
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.