Building wealth in the stock market is very straightforward. It’s all about patiently holding shares of competitively positioned businesses that grow their revenues and profitability. Occasionally, the market sends these stocks lower, creating attractive buying opportunities for investors focused on the company’s long-term trajectory.
Here are two growth stocks to buy now after their recent pullback.
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Millions of people across Argentina, Mexico, and Brazil are shopping on MercadoLibre‘s (NASDAQ: MELI) marketplace. It provides the same level of convenience to shoppers in Latin America as Amazon does in the U.S. MercadoLibre is the dominant e-commerce and digital financial services provider in this highly populated region, and it’s still in the early stages of growth.
There is a long runway ahead. Latin America has over 650 million people — about double the U.S. — yet e-commerce penetration relative to total retail spending in the region is behind that of the U.S., U.K., and China. In the recent quarter, MercadoLibre’s total unique buyers grew 26% year over year to 76 million. It also had more than 72 million fintech users, up 29% year over year.
MercadoLibre’s growing ecosystem of products, including credit cards and lending, provides multiple ways to monetize its growing user base. Over the past four years, trailing-12-month revenue climbed from $6 billion to over $26 billion. And improving margins is helping profits grow even faster.
The company has taken on more debt to expand consumer credit products, but customer defaults have remained low, indicating that management is disciplined in expanding this side of the business. Over time, these offerings should further strengthen MercadoLibre’s position as the region’s leading digital financial services provider.
At a reasonable forward price-to-earnings multiple of 32, the stock looks attractive relative to Wall Street’s 32% annual earnings growth estimate in the next several years. The recent pullback offers a compelling entry point.
While Amazon dominates U.S. e-commerce, millions of small businesses worldwide still need help building an online storefront and accepting payments. Shopify (NASDAQ: SHOP) provides the essential tools to set up a store, ship products, take payments, and more. Revenue grew 31% year over year in the fourth quarter as the company continues to tap a massive addressable market.
