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MercadoLibre (MELI 0.85%) it may not be a household name in the US, but savvy investors know that this e-commerce company has historically been the best performer in the online retail sector.

In fact, it’s even better Amazon since its 2007 IPO, and the returns of both stocks have dwarfed S&P500 in this time frame.

MELI data by YCharts

Like much of the e-commerce sector, MercadoLibre’s stock declined in 2022 during the bear market, but unlike most other e-commerce competitors, MercadoLibre’s business continued to experience strong growth and demand continued to grow even after the adverse environment caused by the pandemic has passed.

MercadoLibre has since rebounded, recouping most of its losses, but the company’s stock is still down about 15% from its pandemic-era peak. With the S&P 500 and Nasdaq Composite have reached record highs again, it seems reasonable to expect MercadoLibre stock to reach new highs as well.

Let’s take a closer look at MercadoLibre and why it’s worth buying the stock today.

What is MercadoLibre?

MercadoLibre is best known as an online retailer, but its business is much more than that.

The company operates as a direct online seller, selling existing goods through its website, and also operates a third-party marketplace, allowing individual sellers to sell goods on its platform, for which it earns a commission. This is the same e-commerce model that has made Amazon so successful.

MercadoLibre operates in Latin America, but almost all of its business comes from Brazil, Argentina and Mexico. Brazil is its largest market, generating about half of its revenues.

In addition to its core e-commerce business, the company also owns MercadoPago, a digital payments and fintech company that has become arguably the most valuable part of the company. In addition to serving as a payment platform, MercadoPago also offers point-of-sale devices to brick-and-mortar merchants throughout Latin America, where digital payment technology is not as developed as in the United States. This business allowed MercadoLibre to enter the huge retail market in Latin America.

In addition to its two main businesses, e-commerce and fintech, the company also runs the MercadoEnvios parcel delivery service, strengthening its competitive advantage as most sellers use MercadoEnvios to ship their orders. Finally, the company also runs its own lending business, MercadoCredito, which lends money to sellers and other borrowers, as well as an asset management company called MercadoFondo.

Like Amazon, MercadoLibre has built an interconnected network of businesses that complement each other and create a wide economic moat. MercadoLibre is not only growing rapidly, but its margin is also increasing. The company has proven itself against competitors such as Amazon and Sea limited liability companyShopee.

Is MercadoLibre a growth stock?

MercadoLibre is one of the fastest growing companies in the e-commerce sector and this trend could be observed in the first quarter.

Revenues increased 36% to $4.3 billion and increased 94% on a currency neutral basis as the devaluation of the Argentine peso impacted reported results. Gross merchandise volume increased 71% on a currency-neutral basis to $11.4 billion, and total payment volume increased 86% on a currency-adjusted basis.

Operating margin was 12.2%, up 120 basis points on a year-over-year basis, according to the company.

MercadoLibre is growing rapidly and the company has strong opportunities to expand in Latin America, penetrating the region further and adding new businesses.

Why buy MercadoLibre shares?

The company has a long history of outperforming the stock market and gaining market share, and is increasing profit margins through additional activities such as advertising and credit, and scaling its core businesses such as Marketplace and MercadoPago.

As profit margins expand, shares look as cheap as ever, with a forward P/E ratio of 50. Investors can take advantage of a discount from the top by buying shares now.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Jeremy Bowman holds positions at Amazon, MercadoLibre and Sea Limited. The Motley Fool has positions in and recommends Amazon, MercadoLibre, and Sea Limited. The Motley Fool has a disclosure policy.