Recent business updates from MercadoLibre (MELI 3.09%) and Walt Disney (DIS -0.04%) are shining a big spotlight on the attractive values of these industry leaders. Shares of the fast-growing e-commerce operator in Latin America are up 10% year to date, while Disney stock has jumped 21%.
Both stocks are outperforming the S&P 500's return of 5.3% at the time of writing, but there are good reasons to expect more upside over the next few years.
1. MercadoLibre
Latin America is one of the fastest-growing e-commerce markets in the world. MercadoLibre is the leader, with a marketplace surpassing 50 million unique buyers. Its leading position in a growing market has the stock up 394% over the last five years.
MercadoLibre has been growing for many years, which is indicative of a long runway of growth. However, investors are still not paying as high of a premium for the company's spectacular revenue growth as they did before the pandemic.
The shares currently trade at a price-to-sales (P/S) ratio of 6.67, a discount to the P/S average of 10.7 over the last decade. The discount looks unwarranted as the company's revenue grew 69% year over year in the third quarter, with profits also climbing due to improving margins.
There are plenty of catalysts for more growth in the near term. MercadoLibre relaunched its Meli+ service, which is like Amazon Prime. It bundles discounts on content subscription services, including Disney+, with free shipping and other perks. Prime was a major lift for Amazon over 10 years ago, and investors might be underestimating Mercado's opportunity here.
The company is also expanding its fulfillment centers to speed up delivery. It just opened its first regional fulfillment center in Rio de Janeiro -- Brazil's second-largest e-commerce market.
All said, MercadoLibre is solidifying its competitive position in Latin America, a market with more than 300 million digital buyers, according to Statista, and is expected to increase another 20% by 2027. The stock is a surefire winner for the long term.
2. Walt Disney
Walt Disney has given investors a roller coaster ride in recent years. But when CEO Bob Iger, who successfully guided the company's growth between 2005 and 2020, returned to the company over a year ago, it seemed only a matter of time before improving financial results would point investors back to the inherent value in Disney's brands.
Iger's master plan to strengthen Disney's parks, film studios, and streaming services is starting to show promise. Disney showed significant progress last quarter that pushed the stock back above the $100 share price level. While revenue was flat over the year-ago quarter, the company's adjusted earnings per share were up 23%.
The turnaround strategy is gaining credibility with investors. Disney's profits are growing again, which sets the stage for further investment in the parks. Iger previously unveiled a grand plan to invest $60 billion over 10 years.
Iger is also showing the awareness to invest in areas where younger audiences are spending more time these days, such as video games. Disney recently announced a $1.5 billion investment in Epic Games. As part of the deal, Disney will bring its iconic content to the popular Fortnite title in "a transformational new games and entertainment universe."
The stock is still cheap, trading 46% below its previous peak. As Disney returns to profitable growth, the stock offers significant upside and can outperform the broader market.
