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Motley Fool Global Gains / GGS: MercadoLibre


Subject:  Re: Tim's Valuation Date:  1/25/2010  12:09 PM
Author:  TMFMmbop Number:  86 of 145

Just wondering if you, Tim, has an updated valuation?

Yes, I watch this one closely.

Mainly the FCF growth rate, discount rate, and any margin of safety you think is adequate.

It breaks out to a roughly 30% FCF annual growth rate over the next five years and uses a 14% discount rate. That yields a fair value of $30. If we demand a 20$ margin of safety, that means we'd buy at $24.

To your point, however, a 14% DR with a 20% MoS is quite aggressive, so I'd likely get interested again at any price below $30 (which right around where 30x FCF would put you).

Also, you're right to normalize for taxes, particularly in LatAm where tax rates tend to err on the high side.

All of that sad, I've been cheering the recent drops. I would appreciate the opportunity to put MELI back on our scorecard at the right price.

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