MercadoLibre (NASDAQ:MELI) wasn't the first to underwhelm analysts this earning season, nor will it be the last. After an initial increase in share price leading up to MercadoLibre's after-hours announcement on Nov. 1, traders tore into MercadoLibre, and kept up the selling pressure the following day. Does missing analysts' earnings expectations by $0.01, or revenue by 1%, justify an 8.6% drop in MercadoLibre's share price?

The quick answer is: yes -- and no. A closer examination of earnings (beyond the expectations, that is) demonstrates MercadoLibre's Q3 wasn't bad at all. In fact, there's a lot to like about what MercadoLibre's doing in Latin America, a market with substantial long-term opportunity. Unfortunately for shareholders, Q3 results are only part of the MercadoLibre story.

First, the good news
In U.S. currency, MercadoLibre increased net revenue over 19% compared to Q3 2011. Those kind of results aren't surprising, considering MercadoLibre increased its sales volume 22%, and the payment transaction business jumped almost 65% compared to last year. As for those disappointed MercadoLibre analysts, a little digging's in order.

Revenue expectations, though up significantly year over year, came in about 1% below guidance -- $97.27 million vs. the $98.12 million MercadoLibre analysts had estimated. Earnings, also below expectations, were $0.59 a share this quarter compared to the $0.60 a share MercadoLibre generated last year. Analysts were looking for the same $0.60 a share this quarter as last, but had to settle for MercadoLibre's $0.59 a share.

But here's the thing: If you remove the one-time gain MercadoLibre enjoyed in Q3 of 2011, comparable net income growth was actually 7.3% in U .S. dollars, and over 23% in local currencies. The non-GAAP growth in income becomes even more impressive when you consider MercadoLibre increased product and sales technology spending over 30 % compared to last year. Combined with its $21.9 million in free cash flow in Q3, MercadoLibre doesn't have anything to apologize for.

Now for the bad news
Okay, so maybe the market overreacted to the infamous "missing estimates" syndrome. Unfortunately for MercadoLibre shareholders, there's more than one reason its share price easing makes sense, even if it is for the wrong reasons.

Though MercadoLibre continues to grow users, revenue, and just about every other financial metric (including expense spending), Q3 of 2012 did have slower overall growth rates. To be fair, a couple of key markets, including Mexico and Argentina, grew more than the year-ago period, but those are the exceptions.

Not surprisingly, along with the increase in Q3 expenses, MercadoLibre saw a decrease in operating income margin . Other key financial measures, along with the margin pressure, are where MercadoLibre's current share price level becomes a bit disconcerting.

eBay (NASDAQ:EBAY) and its industry-leading PayPal unit, a combined $63 billion leader in the sector, is a better value than MercadoLibre. eBay currently trades at less than half MercadoLibre's nearly 37 times trailing earnings, and with the holidays coming and improving domestic consumer confidence, eBay looks pretty darn good by comparison.

But MercadoLibre is a high-growth play compared to the more established eBay, so trailing P/E isn't a fair comparison, one might note. Problem is, even looking ahead, eBay remains a better relative value -- it has a forward P/E of 17.84 compared to MercadoLibre's 27.69.

The biggest of the big e-tailers, Amazon (NASDAQ:AMZN), is off the P/E charts compared to everyone else, including MercadoLibre. But Amazon's price-to-sales ratio -- an important measure for e-tailers -- is well below MercadoLibre. And Amazon CEO Jeff Bezos has made no secret of the impact his near-term spending spree will have until its infrastructure is built out.

MercadoLibre is doing a lot of things right, including growing across nearly all key financial areas. There's just one problem: MercadoLibre is too expensive, and presents little to no mid-term growth opportunity at these levels. The easing of MercadoLibre's share price is warranted, it's just for the wrong reasons.

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.