MercadoLibre (MELI 0.58%) has convinced investors with its successes in a difficult business environment. Despite the challenges facing companies in Latin America, MercadoLibre is succeeding in several areas and its stock has recovered from the 2022 bear market to reach new record highs.

In addition, MercadoLibre is a company behind a stock that is growing rapidly. While there are many attributes that explain its success, there are three in particular that explain why investors should buy shares of the online and direct marketing retailer now.

1. MercadoLibre is antifragile

In the investment world, “antifragility” means that a company becomes stronger in the face of difficult conditions, and this is certainly true for MercadoLibre.

The company operates exclusively in Latin America, a region where countries often face difficult regulatory environments, political instability and high inflation. But rather than shying away from such challenges, MercadoLibre turns these difficulties into business opportunities.

When the company started selling goods online, the vast majority of customers in its markets were cash-based customers who could not purchase on the platform. Rather than accept this situation, the company created Mercado Pago to offer products and services that allow people to make digital transactions. This fintech company was so successful that it opened the platform to customers who did not purchase from MercadoLibre.

Mercado Envios, the company’s shipping and fulfillment arm, was similarly successful. Eventually, the company offered fulfillment and shipping services to third-party businesses that sold their goods on MercadoLibre.

2. MercadoLibre is a leader in several industries

Such segments also helped the company become the leader in e-commerce in Latin America and beyond. Online shopping was still in its infancy when MercadoLibre launched its sales platform in 1999. Since then, Amazon Since MercadoLibre was little more than a bookseller at the time, it was easier for it to establish itself in Latin America.

And even if Amazon had been able to gain a stronger foothold, the company does not offer fintech services, so it would likely never have been able to achieve the market leadership that MercadoLibre achieved with Mercado Pago’s help. Moreover, fintech was a largely nonexistent industry at the time Mercado Pago was founded. By choosing to become a fintech provider to other companies, the company was able to become a market leader in its region.

Likewise, Mercado Envios established its own market leadership. Although American consumers now take same-day or next-day delivery for granted, it did not exist in Latin America before Mercado Envios.

3. MercadoLibre shares are relatively cheap

Given all of the company’s strengths, it may come as a surprise to investors that MercadoLibre stock is trading at a price that many would consider reasonable.

Admittedly, some observers may disagree with this assessment: Based on a price-to-earnings (P/E) ratio of 73, it is not cheap. This P/E ratio is significantly higher than Amazon, which trades at 43 times earnings, or Alibabawhich has a P/E ratio of 22. However, the P/E ratio does not take into account MercadoLibre’s growth, which is huge by any measure. In the first half of 2024, revenue increased 39% year-over-year to $9.4 billion.

This was not a one-off event. Sales grew 37% in 2023 and 49% in 2022, when the pandemic was still hampering many offline businesses.

Furthermore, MercadoLibre became profitable on an annualized basis in 2021, and its net income growth has increased from there. In the first half of 2024, net income increased 89% to $875 million. Its income growth is so high that its price-to-earnings-growth (PEG) ratio is just under 0.9. Any stock with a positive PEG ratio below 1 is generally considered undervalued. This makes it more likely that even some value investors will continue to buy MercadoLibre shares despite the high P/E ratio.

Investing in MercadoLibre

At first glance, MercadoLibre looks like an unlikely growth story. The company operates in a difficult business environment and has had to build other businesses from scratch to survive and remain competitive in its core segment. However, these side businesses have helped make MercadoLibre more resilient and enabled the company to become an industry leader in more than one niche in Latin America.

Despite the significant growth and high P/E ratio, the valuation does not seem to fully reflect the enormous growth potential that lies ahead of the company. With all these factors in mind, investors should consider buying MercadoLibre shares even though they are trading near their record highs.