Source: MercadoLibre

MercadoLibre (NASDAQ:MELI) is scheduled to report third-quarter earnings after the market close on Thursday. The e-commerce leader in Latin America has been hurt by macroeconomic headwinds in countries such as Venezuela, Argentina, and Brazil lately, which is dragging on financial performance. However, macroeconomic considerations aside, the business is firing on all cylinders.

Let's look at MercadoLibre's coming earnings release and the main factors that investors should watch closely.

Big risks and opportunities in Latin America
E-commerce accounts for only 5% of retail sales in Latin America, while nearly 12% of U.S. retail transactions are done online. This means MercadoLibre enjoys enormous opportunities for growth as e-commerce gains participation in the retail industry over the coming years. Besides, emerging markets tend to generate higher economic growth than developed countries over the long term, and Latin America is no exception to the rule.

Investors in MercadoLibre have much to gain in coming years from the company's exposure to Latin America. Over recent quarters, however, economic headwinds in the region have been a major problem for the company. Venezuela and Argentina face rampant inflation, accelerating currency devaluation, and stagnant economic growth. While the situation is not that unstable in Brazil, MercadoLibre's top market, the nation has dealt with disappointing recent growth and currency pressures.

In that context, MercadoLibre's financial performance can be hard to evaluate in monetary terms. Financial figures in U.S. dollars can be unstable due to devaluation of local currencies in a particular quarter, while analyzing figures in local currencies masks the fact that those currencies are rapidly depreciating.

For this reason, investors must maintain a balanced approach when looking at the numbers. Data in local currencies is clearly too good to be true, while figures in U.S. dollars can be too pessimistic. Looking at nonmonetary metrics could provide more valuable and stable information.

What you need to watch
Wall Street analysts on average forecast $130.99 million in sales during the quarter, an increase of only 6% from $123.1 million in the third quarter of 2013. This would represent a material deceleration in the growth rates that MercadoLibre reported over the last several quarters, usually in the neighborhood of 20%. However, currency fluctuations are most likely largely responsible for this growth slowdown.   

Earnings per share are forecast to come in at $0.65, versus $0.73 in the same period of 2013. Once again, currency devaluation will probably be a major drag on numbers reported in U.S. dollars.

Keeping this in mind, investors might want to focus on key operational metrics that are not affected by exchange rate volatility. For example, items sold on MercadoLibre during the second quarter of 2014 increased 17.6% year over year to 23.6 million, while total payment transactions through MercadoPago spiked 39.8% to 10.3 million.

The company had 109.6 million users at the end of the second quarter, a 21.5% increase from the second quarter in 2013. Based on data for the second quarter, 31% of new registered users are on mobile platforms, and mobile penetration of MercadoLibre's gross merchandise volume reached 16%. Investors would clearly like to see the user and mobile engagement numbers rise in the coming earnings report.

Some specific growth initiatives are also worth watching. Official stores for large brands reached 226 by the end of the second quarter, and management believes MercadoLibre has considerable room for growth by becoming the leading e-commerce solution for big and popular retailers.

The company is also consolidating its competitive position in the industry by expanding its MercadoEnvios shipping solution. MercadoEnvios is a relatively new initiative, but it still accounted for 25% of items sold in Brazil during the second quarter, so it seems to be rapidly gaining traction.

The takeaway
Wall Street usually focuses on sales and earnings data, but these metrics can be particularly volatile for MercadoLibre in the short term due to economic instability in Latin America. Looking beyond the headline numbers and analyzing key operational metrics could offer a clearer picture for evaluating MercadoLibre's performance in the earnings release due this week.

Andrés Cardenal has no position in any stocks mentioned. The Motley Fool recommends MercadoLibre. The Motley Fool owns shares of MercadoLibre. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.