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VALUATION SCENARIOS - DISCOUNTED CASH FLOW (DCF) ANALYSIS
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📊 DYNAMIC GROWTH RATE CALCULATION FOR MELI
━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━

Historical Data Inputs:
  • Revenue CAGR 13yr: 38.7%
  • EPS CAGR 13yr: 24.8%
  • Quality boost: ROIC 16.6% (>15%)
  • 📊 Using EPS CAGR only: 24.8%
  • 📊 Good ROIC (16.6%) → Factors: Bear 50%, Base 75%, Bull 100%
  • 📊 DATA-DRIVEN BASE: 24.8% × 75% = 18.6%
  • 🔻 Bear: 24.8% × 50% = 9.0%
  • 🔺 Bull: 24.8% × 100% = 12.0%

Weighted Historical Growth: 31.7%
Industry: Specialty Retail (Consumer Cyclical)
Industry Growth Modifier: +0.0%
Quality Adjustments: +1.0%

Growth Rates (10-year projection):
  🔻 Bear Case: 7.5% (conservative, recession-resistant)
  ⚖️  Base Case: 12.0% (sustainable, achievable)
  🔺 Bull Case: 12.0% (optimistic, strong execution)

Growth Rate Bounds:
  • Industry floor: 2.0%
  • Industry ceiling: 12.0%


Stock: MELI
Current Price: $1988.26
Shares Outstanding: 0.05B (50,697,375 shares)

Base Year FCF (FY 2024): $7.1B (from financial statements)

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BEAR CASE (Probability: 25%)
Conservative: Below-trend growth, elevated risk premium, modest recession impact

ASSUMPTIONS:
  • FCF Growth Rate (Years 1-10): 7.5%
  • Discount Rate (WACC): 12.0%
  • Terminal Growth Rate: 2.0%

10-YEAR FCF PROJECTION:
Year     FCF ($M)        PV Factor    PV of FCF ($M) 
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1        $7,587,350,000      0.8929 $6,774,419,643
2        $8,156,401,250      0.7972 $6,502,233,139
3        $8,768,131,344      0.7118 $6,240,982,701
4        $9,425,741,195      0.6355 $5,990,228,931
5        $10,132,671,784      0.5674 $5,749,550,090
6        $10,892,622,168      0.5066 $5,518,541,381
7        $11,709,568,831      0.4523 $5,296,814,272
8        $12,587,786,493      0.4039 $5,083,995,842
9        $13,531,870,480      0.3606 $4,879,728,152
10       $14,546,760,766      0.3220 $4,683,667,646
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Total PV of 10-Year FCF:            $56,720,161,798

TERMINAL VALUE:
  • Year 11 FCF: $14,837,695,981
  • Terminal Value: $148,376,959,811
  • PV of Terminal Value: $47,773,409,986

VALUATION SUMMARY:
  • Enterprise Value: $104.5B
  • Shares Outstanding: 0.05B
  • Intrinsic Value per Share: $2061.12
  • Current Price: $1988.26
  • Upside/Downside: +3.7%
  • Margin of Safety: 3.5%
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BASE CASE (Probability: 50%)
Balanced: Sustainable growth trajectory, market-appropriate discount rate, realistic perpetuity assumptions

ASSUMPTIONS:
  • FCF Growth Rate (Years 1-10): 12.0%
  • Discount Rate (WACC): 10.0%
  • Terminal Growth Rate: 2.5%

10-YEAR FCF PROJECTION:
Year     FCF ($M)        PV Factor    PV of FCF ($M) 
------------------------------------------------------------
1        $7,904,960,000      0.9091 $7,186,327,273
2        $8,853,555,200      0.8264 $7,316,987,769
3        $9,915,981,824      0.7513 $7,450,023,910
4        $11,105,899,643      0.6830 $7,585,478,890
5        $12,438,607,600      0.6209 $7,723,396,688
6        $13,931,240,512      0.5645 $7,863,822,082
7        $15,602,989,373      0.5132 $8,006,800,666
8        $17,475,348,098      0.4665 $8,152,378,860
9        $19,572,389,870      0.4241 $8,300,603,930
10       $21,921,076,654      0.3855 $8,451,524,001
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Total PV of 10-Year FCF:            $78,037,344,068

TERMINAL VALUE:
  • Year 11 FCF: $22,469,103,571
  • Terminal Value: $299,588,047,611
  • PV of Terminal Value: $115,504,161,350

VALUATION SUMMARY:
  • Enterprise Value: $193.5B
  • Shares Outstanding: 0.05B
  • Intrinsic Value per Share: $3817.58
  • Current Price: $1988.26
  • Upside/Downside: +92.0%
  • Margin of Safety: 47.9%
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BULL CASE (Probability: 25%)
Optimistic: Strong execution, market share gains, operating leverage, sustained competitive advantages

ASSUMPTIONS:
  • FCF Growth Rate (Years 1-10): 12.0%
  • Discount Rate (WACC): 9.0%
  • Terminal Growth Rate: 3.0%

10-YEAR FCF PROJECTION:
Year     FCF ($M)        PV Factor    PV of FCF ($M) 
------------------------------------------------------------
1        $7,904,960,000      0.9174 $7,252,256,881
2        $8,853,555,200      0.8417 $7,451,860,281
3        $9,915,981,824      0.7722 $7,656,957,353
4        $11,105,899,643      0.7084 $7,867,699,299
5        $12,438,607,600      0.6499 $8,084,241,481
6        $13,931,240,512      0.5963 $8,306,743,540
7        $15,602,989,373      0.5470 $8,535,369,509
8        $17,475,348,098      0.5019 $8,770,287,936
9        $19,572,389,870      0.4604 $9,011,672,008
10       $21,921,076,654      0.4224 $9,259,699,678
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Total PV of 10-Year FCF:            $82,196,787,965

TERMINAL VALUE:
  • Year 11 FCF: $22,578,708,954
  • Terminal Value: $376,311,815,902
  • PV of Terminal Value: $158,958,177,800

VALUATION SUMMARY:
  • Enterprise Value: $241.2B
  • Shares Outstanding: 0.05B
  • Intrinsic Value per Share: $4756.75
  • Current Price: $1988.26
  • Upside/Downside: +139.2%
  • Margin of Safety: 58.2%
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SENSITIVITY ANALYSIS - Intrinsic Value per Share
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How intrinsic value changes with different growth and discount rates:

Growth →           3%          5%          8%         10%         12%         15%   
WACC ↓      ------------------------------------------------------------------
   8%    $  2698↑  $  3154↑  $  3987↑  $  4659↑  $  5442↑  $  6861↑ 
   9%    $  2279   $  2651↑  $  3326↑  $  3870↑  $  4502↑  $  5643↑ 
  10%    $  1973   $  2282   $  2844↑  $  3295↑  $  3818↑  $  4760↑ 
  11%    $  1739↓  $  2002   $  2478   $  2859↑  $  3299↑  $  4092↑ 
  12%    $  1554↓  $  1781↓  $  2190   $  2517   $  2894↑  $  3571↑ 

Current Price: $1988.26
Base FCF: $7,058,000,000M
Terminal Growth: 2.5% (constant)

Legend: ↑ = 30%+ upside  |  ↓ = 10%+ downside
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PROBABILITY-WEIGHTED VALUATION
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Bear Case (2061.12) × 25%  = $515.28
Base Case (3817.58) × 50%  = $1908.79
Bull Case (4756.75) × 25%  = $1189.19

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Weighted Average Intrinsic Value: $3613.26
Current Price: $1988.26
Upside/Downside: +81.7%
Margin of Safety: 45.0%
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