Latin America's leading online marketplace continues to gain steam.

Last week's quarterly report from MercadoLibre (Nasdaq: MELI) was another gem. Revenue climbed 28% higher, as profitability more than doubled.

International investing guru Tim Hanson has seen enough. In the Fool.com article "Why MercadoLibre Can't Keep Rising," he argued last week that the shares are overvalued and that the ceiling is closer than many believe.

I disagree.

For starters, Hanson makes some assumptions that I just can't sign off on.

  • He believes Latin America's poverty line isn't likely to improve this decade.
  • He limits MercadoLibre's growth to Central and South America, despite its recent test-run in Portugal and the obvious appeal of a Spanish-language marketplace to this country's largest minority population.
  • He pegs user annualized growth at 29% over the next 10 years, yet marketplace revenue is targeted to climb at a mere 22% pace. In other words, Hanson believes that folks will be spending less -- and a lot less once you begin to bake in 10 years of consumer price inflation. I don't buy it.

It's easy to get excited about MercadoLibre these days. Earnings during the four most recent quarters spiked 79%, 137%, 130%, and 126% higher, respectively.

But bulls shouldn't get used to these heady post-recessionary spurts. Analysts see revenue and earnings climbing by a more modest 35% next year. I'll take it. That's a lot more octane than the 25% top-line burst that Wall Street sees out of Amazon.com (Nasdaq: AMZN) and the pedestrian 10% push at original marketplace eBay (Nasdaq: EBAY).

Hanson is kinder on the growth prospects of MercadoLibre's MercadoPago payment platform -- just as PayPal is carrying eBay these days -- but he makes the fatal flaw of assuming that Pago will only be used to settle MercadoLibre transactions come 2019. Have we not seen how eBay and even Google (Nasdaq: GOOG) Checkout have reached out to be the platform of choice through merchant services?

MercadoLibre, at 44 times next year's earnings, isn't going to smoke out the value vultures, but this is a story that is still early in the telling. If this truly proves to be a scalable model, and the company avoids the community-alienating potholes that befell eBay's marketplace business along the way, you'd be nuts to punch out when the global potential of MercadoLibre is just starting to be realized.

Is MercadoLibre overvalued, undervalued, or priced just right? Share your thoughts in the comments box below.