This Stock Turned $1,000 Into $20,000 in 10 Years, and It’s Just Getting Started

This Stock Turned ,000 Into ,000 in 10 Years, and It’s Just Getting Started

Would you like to see a $1,000 investment gain almost 2,000% in 10 years? Investors dream of these kinds of returns. If you can identify stocks with incredible potential and diversify your holdings, you could very well end up owning a stock that generates such gains.

Free market (NASDAQ: MELI) stock is an example. If you had invested $1,000 in MercadoLibre stock 10 years ago, you would have just over $20,000 today. But we are not here to talk about the past. Let’s see if this stock can reward investors the same way in the future.

It’s not easy being a 20-bagger

MercadoLibre was relatively unknown 10 years ago, particularly in the United States, given its focus on Latin America. It required a leap of faith and came with a lot of risk, but there was a compelling argument for the business as a young person. Amazon with a e-commerce business in an untapped market.

To see that 20 bag return, you also had to hold the stock despite significant volatility. Even today, the stock has not yet returned to the all-time high it reached at the start of 2021.

This Stock Turned ,000 Into ,000 in 10 Years, and It’s Just Getting Started

MELI Graphic

MercadoLibre continued to report exceptional growth over the past three years, but it fell along with many stocks during the recent bear market due to its high valuation, decelerating sales growth and declining profitability . However, stocks have largely recovered and are in an excellent position to continue to rise.

Unlocking opportunities in fintech

MercadoLibre is now an e-commerce and fintech heavyweight dominating the Latin American market. The company has recorded double-digit turnover growth for years, while increasing its profitability.

Fintech is currently its main growth engine. Many Latin American consumers still lack access to financial and banking services. MercadoLibre offers easy-to-use digital alternatives such as electronic payments and credit products. Total payment volume increased 35% year-over-year, or 86% on a currency-neutral basis, in the first quarter, and the loan portfolio grew 46%.

To be clear, the company’s core e-commerce segment is still thriving, as many Latin American countries are seeing some of the highest e-commerce growth rates in the world. MercadoLibre’s gross merchandise volume grew 20% (71% currency-neutral) last quarter, and it accelerated after a post-pandemic slowdown. MercadoLibre continues to expand its already quite efficient logistics network. For example, orders delivered within 48 hours increased 16% year-over-year in the first quarter and accounted for 52% of total orders. This is still a constant driver of growth.

Like Amazon, the company makes most of its revenue from its reliable e-commerce business, and uses it to fund new, higher-growth businesses. It’s a compelling model that creates incredible opportunities.

Will he be able to maintain these achievements?

No one can predict the future, but is it realistic to expect MercadoLibre stock to return another 2,000% over the next 10 years? This is the kind of performance generally attached to small, hypergrowth companies.

Let’s see how this could happen. MercadoLibre stock has a market capitalization of 86 billion dollars. If it were multiplied by 20, it would become a $1.7 trillion company. Today, only six companies have a market cap of over $1 trillion, and incidentally, Amazon is one of them with a market cap of $1.9 trillion.

Holding MercadoLibre’s stock price-to-sales ratio constant at its current level of 5.5, the company’s 12-month revenue of $15.8 billion is expected to rise to around $313 billion to reach the desired market capitalization of $1.7 trillion. Over 10 years, that implies a compound annual growth rate (CAGR) of 35%, almost exactly where its revenue growth took place last quarter. This 35% CAGR is also lower than the average quarterly revenue growth of 44% that MercaoLibre has enjoyed over the past 10 years.

But in the end, this all remains theoretical. Growth rates could slow, valuation could change, and a multitude of factors can impact a company and its stock price, particularly over a ten-year period.

Whether that happens or not, MercadoLibre is tackling incredible opportunities across its various markets and remains a great growth stock to add to your portfolio.

Should you invest $1,000 in MercadoLibre right now?

Before buying stocks on MercadoLibre, consider this:

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jennifer Saibil has positions in MercadoLibre. The Motley Fool posts and recommends Amazon and MercadoLibre. The Mad Motley has a disclosure policy.

This action turned $1,000 into $20,000 in 10 years, and it’s just the beginning was originally published by The Motley Fool

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