Latin America is one of the world's emerging markets, where technology isn't quite as established as in places like the U.S. However, e-commerce company MercadoLibre (MELI 0.85%) has been steadily building its business throughout the region since 1999. It faced increased competition over the past couple of years, but MercadoLibre could now strengthen its competitive position.

It's an intriguing development when the stock is trading at one of its lowest valuations in recent memory. Is there something investors are missing? Or is Wall Street dropping the ball on this potential fat pitch? Here is why MercadoLibre could be one of the best buys you can make today.

The competition can't cut it

Latin America has become a hotbed of investment opportunity in recent years. Increased technological development is opening up the region's massive population of 667 million to modern conveniences like the internet and e-commerce. Research by Lazard indicates that the number of digital buyers in Latin America could increase from 172 million to 435 million by 2031, while the spend per buyer increases 3.5-fold.

The potential growth attracted the attention of Sea Limited, an e-commerce, gaming, and payments company in Southeast Asia, which began setting up in Latin American countries in 2019. Sea Limited owns the gaming brand Garena, which created Free Fire. This mobile game is very popular in Latin America and was used by Sea Limited to try to wedge its e-commerce marketplace Shopee into the region.

Sea Limited did gain some significant traction; according to Apptopia, it became the most popular shopping smartphone app in Latin America in 2021, just a couple of years after launching in the region. However, taking on an incumbent competitor in a foreign market is expensive, especially in a traditionally competitive business like e-commerce. It was reported last month that Sea Limited was dramatically scaling back its pursuit of Latin America, shutting down operations in Chile, Columbia, and Mexico to reduce the company's cash burn. It remains operational in Brazil, a key market in Latin America, but the stall is a positive development for MercadoLibre.

Why it's significant for MercadoLibre

MercadoLibre is in a tough battle for long-term supremacy in Latin America. The company still generates the most traffic in the region, bringing in 447 million monthly visits across its websites. Alibaba's AliExpress is second at 425 million, so the emergence of Shopee was a potential headache for MercadoLibre, which already has its hands full.

E-commerce is an important business in its own right, but MercadoLibre attaches other products and services to its platform that its users can use. For example, MercadoLibre has steadily built a massive fintech arm -- it has 31.6 million users accessing services like peer-to-peer payments, digital wallets, investing accounts, and lending. The company is also growing its logistics and advertising businesses as it seeks new ways to monetize the users that flow through its e-commerce business.

I don't think MercadoLibre faces a realistic threat of becoming the minority e-commerce player in Latin America. It essentially has home-field advantage and backs that up with logistics it spent two decades investing in. But the ecosystem of digital services MercadoLibre is building benefits as it grows larger. It will become even harder to challenge MercadoLibre if it keeps growing its market share over the coming years.

When valuation creates a fat pitch

You can see below just how brutal the past year or two has been for investors. MercadoLibre's price-to-sales ratio (P/S) has been a roller coaster that made the climb to its highest-ever valuation, only to plunge to its lowest since the financial crisis of 2008 and resulting bear market more than a decade ago:

MELI PS Ratio Chart

MELI PS Ratio data by YCharts

Ironically, the business is doing better than it has in a long time. Even though MercadoLibre is a much larger company than it was a decade ago, its revenue is growing at its fastest clip in years. It continues fleshing out new businesses, and those levers only give the company more buttons to press for growth while the overall market opportunity is only getting more significant as the region goes digital.

MercadoLibre has slowly built itself into a juggernaut in one of the world's fastest-growing markets. There should be an opportunity for years of growth just based on the region itself and how many different things the company is sticking its nose into. Combine that with a multi-year low valuation, and that sounds like a compelling investment idea any long-term growth investor should consider.