If you want a recipe for growth, take a proven dot-com model like eBay (NASDAQ:EBAY) and sprinkle it over a growing Internet market like Latin America. That's what MercadoLibre (NASDAQ:MELI) has been doing since 1999, but it wasn't until Friday that investors got a chance to buy into the company's hot IPO.

Friday's rocky trading wasn't going to rain on MercadoLibre's parade. Spanish for Free Market, MercadoLibre priced its Wall Street debut at $18 a share. The stock opened at $22 before barreling toward a $28.50 close.

The company is profitable, growing quickly, and is nearly everything that you would want in an aggressive growth company. But before you dive in quicker than you can say "si," let's take a look at the good, the bad, and the bubbly.

The good
If you're a fan of eBay but find yourself souring on the marketplace's slow growth lately, MercadoLibre is a potent elixir. Revenues have more than quadrupled since 2004 to $52.1 million last year.

The company turned profitable last year and has been pumping up its operating margins ever since. Last year's operating margins of 10.4% may not seem all that inspiring. It's less than half of the 23.8% operating margins sported by eBay in 2006. But keep in mind that MercadoLibre is still early in its growth cycle. If you want to stack this up against eBay, you have to go back to 1998 when eBay generated $86.1 million in revenues on operating margins of 14.9%. Oh, and margins at MercadoLibre improved to a healthier 17.7% in this year's first quarter.

Like eBay, MercadoLibre has its own online payment platform. And also like eBay's own PayPal, Mercado Pago is growing quicker than the company's marketplace revenues. Auction listing fees, final value fees, and optional features now account for 85% of total revenue at the company.

MercadoLibre made its debut in Argentina eight years ago this month, but it now has a presence in 12 different Latin American countries. Given its sheer size, it's not a surprise to see that Brazil accounts for 59% of the company's business.

With some countries in the area commanding Internet penetration rates at half of the Stateside adoption rate of roughly 70%, it's easy to fathom the upside of being a leader in regions that will only continue to get more connected in the coming years.

MercadoLibre served as the middleman to more than $1 billion in gross merchandise value transactions last year, and that figure excludes big ticket items like cars and real estate. In 2006, the company watched over 1.7 million unique sellers, 4.4 million buyers, and produced 13.8 million successful auctions.

That may not seem like much compared to the $52.5 billion in gross merchandise value that eBay facilitated last year, but things are just starting to heat up at MercadoLibre.

The bad
With 43.8 million shares outstanding, MercadoLibre's market cap of $1.2 billion doesn't come cheap. Yes, eBay commands a market cap that's more than 40 times greater, but eBay is also a diversified, entrenched giant that's far bigger than MercadoLibre than its multiple would suggest.

2006

eBay

MercadoLibre

Revenues

$5,969.7

$52.1

Op. Profits

$1,423.0

$5.4

Op. Margins

23.8%

10.4%

Net Income

$1,125.6

$1.1

Net Margins

18.9%

2.1%

Market Cap

$49.6 billion

$1.2 billion

*All amounts in millions

To be fair, margins at MercadoLibre are expanding, and they should continue to do so as the company grows. Growth investors should also be able to swallow the top-line disparity, given MercadoLibre's scintillating spurts. When you consider the upside potential of South America and Central America, a premium is clearly justified.

But being small does have its disadvantages. Fraud is a concern at MercadoPago, the way it is with most online payment platforms like PayPal and Google's (NASDAQ:GOOG) Checkout. Just 1.3% of its payment volume has resulted in credit card charge-back authorizations, but that accounts for 15.8% of MercadoPago's net revenue.

Web-based auctions are also a trickier sale in scattered developing markets, where postal and parcel deliveries can be undependable and e-commerce skepticism persists. It's also probably not a good sign that most of the shares offered on Friday came from insiders who were cashing out.

The bubbly
You still have to like MercadoLibre's chances. Obviously, eBay is a titan in many global markets, but you're a worthy warrior if you've proven your ability to grow in the consumer-to-consumer auction space.

Stateside heavies like Yahoo! (NASDAQ:YHOO), Amazon.com (NASDAQ:AMZN), and Overstock (NASDAQ:OSTK) have tried to take on eBay, but with little success. Even lowering listing fees hasn't kept sellers from flocking to eBay. That kind of elasticity should serve MercadoLibre well in its strongest markets.

The company isn't some overnight success story -- it's been at it since 1999. It has also followed eBay's blueprint in snapping up regional players like DeRemate, iBazar, and Lokau at a time when Stateside investors seem to be more focused on the growth initiatives of domestic companies in Asia.

The pressure is clearly on MercadoLibre to earn its lofty valuation. The next few quarters will be critical. Then again, that's the way it often goes with these hot IPO recipes. You just never know what they'll taste like until you let them all simmer together.

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Longtime Fool contributor Rick Munarriz is a satisfied eBay user with 172 positive feedbacks to show for it. He does not own shares in any of the companies in this story. He is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.

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.