Building a diversified stock portfolio introduces an individual investor to an array of different businesses big and small in a variety of industries. Looking at Facebook (NASDAQ:FB) and MercadoLibre (NASDAQ:MELI) might seem like comparing apples and oranges, but it’s a good exercise to analyze two great companies with an eye to finding the better buy. Before we look at the case for each stock, let’s take a look at some metrics to understand how different these two really are.
Even though the e-commerce specialist had a five-year head start, the social media platform is 20 times larger in market capitalization, pulled in 11 times more revenue last quarter, and is highly profitable. MercadoLibre gets the nod for having more impressive top-line growth numbers, but its revenue is limited to its home geography, and its stock is more expensive when looking at the price-to-sales ratio. Let’s look at the case for this e-commerce company.Not to be outdone, its marketplace business is booming. Gross merchandise value (total value of goods sold on the platform) reached $3.6 billion in the most recent quarter, with 98 million items sold. Unique buyers grew 26% this quarter to 22.4 million, and live listings grew 45% to 243 million. Its shipping service, Mercado Envios, shipped 81.2 million items in the quarter, a 46% increase from the previous year. With all of this activity, you might be surprised to find out that e-commerce only makes up 4% of all retail sales in the region. Although this e-commerce and payments company only operates in one geography, it has plenty of room to run. It serves customers in 18 countries across Latin America, but the top three — Brazil, Argentina, and Mexico — make up 94% of its revenue. With all of this opportunity, posting profits isn’t a primary goal, as it continues to invest in its operations to ensure that it will be a bigger player in the future of Latin American retail for years to come. Now let’s check out the argument for the social media giant.
Two high-quality businessesThese two companies serve very different audiences. Facebook makes money selling advertisements on its popular global social media platforms. MercadoLibre makes money operating as an e-commerce retailer and payments processor in Latin America.
|Market capitalization||$584 billion||$29 billion|
|MRQ* revenue||$17.7 billion||$1.6 billion|
|MRQ revenue growth||29%||70%|
|Net income (loss)||$6.1 billion||($0.15 billion)|
|% revenues outside home geography||52%||0%|