1 Unstoppable Growth Stock to Buy and Hold for 10 Years

The last five years have been erratic. A global pandemic, several bear markets, severe economic troubles, and global instability have affected individuals and companies in too many ways. Throughout it all, some corporations, while a bit battered and bruised, have fared well and continue to do so.

MercadoLibre (NASDAQ: MELI)Latin America-based e-commerce company is one such company. Fortunately, MercadoLibre still has plenty of fuel left to grow. Here’s why the stock could do well for the next decade.

MELI total return data according to YCharts.

What’s going well at MercadoLibre

MercadoLibre is a leading e-commerce player in South America. Although it is sometimes called Amazon Latin America, the two companies have some important differences. MercadoLibre’s e-commerce and logistics operations (Mercado Envios) are just part of its business. It also has a fintech unit through Mercado Pago, an online payments platform, and Mercado Shops, which allows businesses to build online storefronts. The company has achieved strong financial results over the past few years.

While it suffered from the e-commerce slowdown between 2021 and 2022, it has since rebounded. MercadoLibre has been consistently profitable since 2022, much to the delight of investors. The company’s second-quarter revenue grew nearly 42% year over year to $5.1 billion. Its revenue growth has slowed from the incredible peaks it reached at the start of the pandemic, but that was never meant to be sustainable. That metric has since returned to somewhere in its pre-pandemic range.

MELI revenue data (quarterly year-on-year growth) according to YCharts.

Meanwhile, MercadoLibre’s net income of $531 million more than doubled from the same period last year. Profitable growth is the way to go in today’s market—investors are much less forgiving of companies that still have red ink on the bottom line, in part because of higher interest rates and a somewhat difficult economic environment.

In addition to the company’s revenue and profit, MercadoLibre has shown significant progress across the board. Its gross merchandise volume, monthly fintech user activity, total payments, and many other factors have all been trending in the right direction. With such results in a relatively difficult environment, it’s no wonder investors are still bidding on the stock.

Why are there still many opportunities for development?

We can be reasonably certain that e-commerce and fintech will continue to thrive through the end of the decade, and probably beyond. Many analysts are predicting this, based in part on consumer trends and the convenience of online retail transactions. Latin America should be no exception. MercadoLibre is therefore in a great position to do reasonably well over the next decade, but only if it can maintain its strong position. It’s hard to imagine anyone knocking the company off its pedestal.

MercadoLibre benefits from the moat in at least a couple of ways: switching costs and network effects. Switching comes at a cost because the company’s services are comprehensive and free. Businesses that open online stores with MercadoLibre, sell products on their main website, and use the fintech platform to process payments will not want to close shop and go to a competitor. They risk losing a lot of customers in the process.

MercadoLibre’s network effect comes from the fact that the more people who are connected to its ecosystem, whether in fintech or e-commerce, the more valuable it becomes to outsiders. In addition, newcomers will have to invest the time and capital to build the infrastructure necessary to operate and ship in multiple Latin American countries. That’s a tall order, especially given that some of these countries are somewhat politically unstable.

MercadoLibre has already done its job. What about the valuation? The stock has a price-to-earnings (P/E) ratio of 55, while the average for the consumer goods industry is currently 23.9. However, analysts expect MercadoLibre’s earnings per share to grow by an average of 41.8% per year over the next five years. MercadoLibre’s valuation seems much more reasonable when you take that into account.

In 10 years, MercadoLibre’s current valuation won’t matter much. In the meantime, the stock will likely deliver above-average profits. That’s why it would be a great move to buy MercadoLibre stock today.

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John Mackey, former CEO of Whole Foods Market, a subsidiary of Amazon, is a member of The Motley Fool’s board of directors. Prosper Junior Bakiny holds positions in Amazon. The Motley Fool holds positions in and recommends Amazon and MercadoLibre. The Motley Fool has a disclosure policy.