Shopify is a great stock with a great future but with a valuation of 20 times revenues it may be time to look elsewhere for your next investment. Two stocks showing similar growth potential but on a much lower valuation are MercadoLibre (NASDAQ: MELI) and Baozun Inc (NASDAQ: BZUN).
MercadoLibre
MercadoLibre began as an auction site but now also provides fixed-price goods from some of the largest retailers in Latin America. Similar to Amazon and Shopify, MercadoLibre helps sellers set up and manage their online store, while also providing logistics, shipping, and payment options.
In its latest results
• Net revenues were $316.5 million, a year-over-year increase of 58.5
• registered users increased 21% year over year to 191 million
• Payment transactions grew 63% year over year
• Adjusted earnings for H1 were up 22.3%
This type of growth doesn’t come cheap and the company is trading for 9.5 times revenues but that compares to Shopify on 20 times. Additionally MercadoLibre is profitable with a forward (2018) PE of 50 while Shopify’s forward PE is 550.
However the outlook for MercadoLibre looks very bright and the runway for growth looks long and steep. Internet connectivity in Latin America has been increasing rapidly. Latest figure show that it has increased to 62% from 50% in 2013 but it remains well below North America’s 90%. Similarly E-commerce in Latin America accounts for only 2.6% of retail sales, compared to 8.4% in the U.S.
Baozun
Baozun is more comparable to Shopify and is generally considered to be its Chinese equivalent – providing services to help its clients create online stores on Tmall and JD.com. It has also been reporting remarkable growth with revenues up 65% in 2015 and 30% in 2016. More importantly, the high margin services business grew by 65% in 2015 and 85% in 2016.
In its latest earnings (Q2 2017) the company reported
• Total Gross Merchandise Volume up 62.5%
• Number of brand partners increased to 140 from 120
• Non-GAAP net income increased over 400%
Growth looks set to continue due to increasing Brand Partners, increasing Chinese Internet Penetration which was only 53% in 2016 and massive Chinese E-Commerce Growth with JD.com reporting a 45% increase in revenues in Q2 2017.
Nevertheless the stock trades on a valuation of only 3.4 times revenues and (is profitable) with a forward (2018) PE of 30.
This is not a recommendation to buy or sell. Stocks are not suitable for all investors. Please do your own research.
Submitted September 30, 2017 at 12:12PM by InterestingNews1 http://ift.tt/2xGgUMQ
