Right now, it looks like a phenomenal opportunity to invest in the market. Many companies are reporting strong third-quarter results despite a cloudy economic outlook. This is a great sign and should trigger investors to start looking for some more growth-related stocks before they really take off.
At the top of my shopping list are UiPath (PATH 0.26%), MercadoLibre (MELI 3.09%), and dLocal (DLO 0.56%). These three companies are posting strong growth and are priced cheaply enough to ensure investors aren't overpaying. Curious about what makes these three stocks great buys? Then continue reading.
UiPath
If you've ever done a repetitive task at work, like filling out an expense report, you've probably thought: "Can this be automated?" With UiPath, the answer is yes.
It's a leader in robotic process automation (RPA), which gives businesses the tools to automate these processes. It can also harness the power of artificial intelligence (AI) to pinpoint which tasks can be automated and what information it can pull from to populate fields.
RPA deployment is in its infancy, as Polaris Market Research puts the current market opportunity at $2.6 billion. UiPath's annual recurring revenue is $1.3 billion, indicating strong segment dominance.
Polaris also expects this market opportunity to increase to $66 billion by 2032. With UiPath already a strong player in this rapidly expanding industry, its growth story could be incredible.
The stock trades for a reasonable 7.4 times sales, making it look like a no-brainer buy.
MercadoLibre
MercadoLibre is a Latin American-based company that trades on American markets, which affects market sentiment and investor's risk appetite. But it hasn't missed a beat in 2023.
The e-commerce and fintech company is growing rapidly, with currency-neutral revenue rising 57% year over year. Its profitability is quickly improving, too, with its second-quarter operating margin of 16.3% its highest since 2017, thanks to some loan loss reserves going untapped.
Both segments of MercadoLibre are doing fantastic. Commerce revenue rose 65% year over year on a currency-neutral basis, while fintech increased 48%. This dual path to growth is a strong business plan, as one can support the other if need be. However, both businesses are crushing it, and MercadoLibre stock looks unstoppable.
But the stock isn't valued like that. At just under five times sales, MercadoLibre is valued near an all-time low.
MELI PS ratio data by YCharts; PS = price-to-sales.
This doesn't seem like a company that should be valued that low, and the stock looks poised for a bull run when investors' risk appetite increases.
dLocal
Similar to MercadoLibre, dLocal doesn't operate in local markets. Instead, it provides the software for commerce giants to operate in countries with less-developed monetary systems, like Thailand, Turkey, and South Africa.
Instead of having to develop these systems for each country, clients can give up a small chunk of revenue to dLocal and instantly have access to many emerging markets. With Amazon, Spotify, and Nike among its clientele, dLocal has plenty of credence. If the U.S. economic outlook improves, companies could look to expand across borders with their research and development funds, which should boost dLocal's business.
It also has strong financials, with its total processed volume of transactions rising 80% to $4.4 billion in the second quarter. Revenue rose 59% to $161 million, and net income was $44.8 million in the second quarter, for a 28% profit margin.
While the stock might seem expensive at 41 times trailing earnings and 29 times future earnings, it isn't when you consider how fast this company is growing. It also has a sizable market because it is doing the job that few other payment processors want to do.
This makes dLocal a great under-the-radar stock that could explode higher in the coming years.
