Fast-Growing Small-Cap With 3x Potential!
Small-cap company growing fast in an underpenetrated market.
Several of my best investment ideas have come from following companies that took a proven business model in one market and adapted it to another market where the penetration was very low.
Take Mercadolibre as an example. There is a reason it’s called “the Amazon of Latin America.” It took the model and implemented it in an underpenetrated market.
There are many others like MercadoLibre because this is a very fruitful soil for entrepreneurship. Look at what’s working in other markets, and bring it to your own.
These companies tend to be very attractive investment opportunities, as the business model is already derisked. When this is combined with low penetration in their respective market, they can easily grow at an above-average rate, at least for a decade.
The downside of this is that it tends to attract a lot of competition.
As the model is proven and a blueprint already exists, it’s easy for others to follow once somebody starts it.
However… In some cases, the business model and industry allow you to create a durable competitive advantage, like in Mercadolibre’s case. In those cases, the business is well-positioned to exploit the underpenetrated market without getting decimated by the competition, and it can become a giant.
This is one of those opportunities.
This company takes a proven business model and implements it in a deeply unpenetrated market.
Result? Booming business. Take a look at this:
Revenue has quadrupled in the last 5 years.
Operating cash flow has almost quintupled since 2020.
EBITDA margin is expanding despite the hyper-growth phase.
What’s even better is that it’s trading only around 12x forward EV/EBITDA despite the fact that it’s still a very small ~$3 billion company with decades of runway ahead.
Plus, it has one of the most promising emerging moats I currently see in the market.
So, let’s cut the introduction and dive deeper into this gem.
🏭 Understanding the Business
Private equity insiders are one of the best-positioned people to become successful entrepreneurs. They observe many portfolio companies and investment opportunities, thus they have a high chance to spot winning models early.