At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." So you might think we'd be the last people to give virtual ink to such "news." And we would be -- if that were all we were doing.

But in "This Just In," we don't simply tell you what the analysts said. We'll also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.

Latin American melodrama
Pity MercadoLibre (Nasdaq: MELI) for a stock, now scorned. After months of whispering sweet somethings in its ear, and being showered with profits in return, Wall Street wizard Stifel Nicolaus unceremoniously dumped its main squeeze last week, declaring: "Yo no te amo, nunca mas!"

I'm paraphrasing, of course. What Stifel actually said was that now that "MercadoLibre has reached our price target of $75," gaining 46% since Stifel recommended buying it on April 30, "the risk/reward ratio is no longer compelling." Although the analyst maintains a "high opinion of the company," MercadoLibre's now-high "valuation and decelerating revenue growth" tell Stifel that there are better places to put your money, and that the stock's no longer a likely outperformer.

I agree ... to a point.

Let's go to the tape
Not that Stifel needs my say-so to support this particular rating. To the contrary, as our CAPS records will show you, this analyst's record stands on its own. Ranked in the top 10% of investors we track, Stifel simply shines when it comes to picking Internet Software and Services stocks. Rackspace (NYSE: RAX) and Google (Nasdaq: GOOG), IAC/InterActive (Nasdaq: IACI) and WebMD (Nasdaq: WBMD) -- this banker's scorecard is a veritable who's who of winners in the ether-space:

Companies

Stifel Says:

CAPS Rating (out of 5)

Stifel's Picks Beating S&P By:

Rackspace

Outperform

****

240 points

WebMD

Outperform

*

39 points

IAC

Outperform

***

25 points

Google

Outperform

***

22 points

Over the four years we've tracked Stifel's performance, 55% of the company's i-recs have outperformed the market -- and Stifel's only getting better with time. A whopping 72% of its active recommendations are "in the green."

Just as important as its record of outperformance on companies like MercadoLibre, though, is MercadoLibre itself -- and the facts supporting Stifel's judgment that the stock's no longer cheap enough to buy. Selling for 75 times earnings, and an only slightly less-frightening 55 times free cash flow, MercadoLibre is arguably more expensive than any of the winners Stifel's decided to keep on its recommended-list (at least on a P/FCF basis).

A Foolish footnote
Granted, MercadoLibre is growing at a rate that puts all these other stocks to shame. Analysts estimate its profits could swell at nearly 40% per year over the next five years. When companies are growing this fast, traditional P/E and even P/FCF ratios often fail to perform as planned -- undervaluing the shares time and again, as free cash flow races ahead of all expectations. Indeed, this is just one of many reasons I recommended buying MercadoLibre myself, years ago.

If you feel you absolutely, positively, must own a piece of this Latin American growth story, I do have some good news for you: There's an easier way to do it -- one that sidesteps the stock's overvaluation, yet allows you to still profit from the company's wildfire growth. Up here north of the border, you see, eBay (Nasdaq: EBAY) actually owns about a 20% stake in MercadoLibre. And eBay is selling for a much more reasonable price than its partial subsidiary -- less than 13 times trailing earnings, and with an enterprise value-to-free cash flow ratio of roughly 13 as well.

In sum, Stifel's right about MercadoLibre being no bargain today. Fortunately, eBay has always been a great place to look for bargains.

Fool contributor Rich Smith owns shares of Google. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 599 out of more than 170,000 members. The Motley Fool has a disclosure policy.

Google is a Motley Fool Inside Value recommendation. Google, MercadoLibre, and Rackspace Hosting are Motley Fool Rule Breakers selections. eBay is a Motley Fool Stock Advisor pick. Motley Fool Options has recommended a bull call spread position on eBay. The Fool owns shares of Google.

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