Mercadolibre (MELI)

Valuentum Retail Equity Research Visit us at www.valuentum.com Ratings as of 10-Sep-2021 Data as of 9-Sep-2021

We've raised our fair value estimate (again) for Mercadolibre as its e- Investment Considerations commerce, payment solutions, and logistics operations have been firing on all- DCF Valuation FAIRLY VALUED cylinders of late. Relative Valuation UNATTRACTIVE Stock Chart (weekly) ValueCreation™ EXCELLENT ValueRisk™ MEDIUM 25,000,000 1,973.00 ValueTrend™ POSITIVE 1,873.00 Cash Flow Generation STRONG 20,000,000 1,773.00 Financial Leverage HIGH 1,673.00 15,000,000 Growth AGGRESSIVE 1,573.00 Technical Evaluation BULLISH 1,473.00 10,000,000 1,373.00 Relative Strength STRONG

5,000,000 1,273.00 Money Flow Index (MFI) NEUTRAL 1,173.00 Upside/Downside Volume (U/D) BULLISH 0 1,073.00 Near-term Technical Support, 10-week MA 1769.00 DCF = Discounted Cash Flow; MFI, U/D = Please see glossary. MA = Moving Average

Business Quality ValueCreation™ The week with the highest trading volume out of the last 30 weeks was a week of heavy selling, or distribution (red bar). ValueRisk™ Very Poor Poor Good Excellent Company Vitals Investment Highlights Low Market Cap (USD) $93,682 • Mercadolibre is the largest e-commerce ecosystem in Avg Weekly Vol (30 wks) 2,082 Latin America. The company benefits from positive Medium 1 30-week Range (USD) 1262.38 - 1970.13 demographic/income trends and rising internet Valuentum Sector Next Generation penetration in the region. The firm was founded in High 5-week Return 1.8% 1999 and is headquartered in Argentina. It suspended its dividend in 2018 to focus on other, more 13-week Return 28.2% opportunistic investments. Very High 30-week Return 0.3% Firms that generate economic profits with little operating variability score near the top right of the matrix. Dividend Yield % 0.0% • The company operates a high-margin and strong Dividends per Share 0.00 cash-generating business. Its brand is well-known, and Relative Valuation Forward P/E PEG Price / FV Forward Dividend Payout Ratio 0.0%the firm boasts a strong marketplace business in Latin Monster Beverage 36.3 2.7 95.4% Est. Normal Diluted EPS 20.68America. It has a huge opportunity for growth, though Roku 720.3 NMF 97.3% it operates in economically volatile markets. P/E on Est. Normal Diluted EPS 91.1 Wayfair 60.1 7.5 86.7% Est. Normal EBITDA 1,906• The firm aims to keep growing the penetration of its Zoom Video 64.5 3.5 83.0% Forward EV/EBITDA 199.8payments, shipping and financing solutions as Peer Median 62.3 3.5 91.0% strategic facilitators of e-commerce both on and off its EV/Est. Normal EBITDA 47.9 Mercadolibre NMF NMF 99.8% platforms, persistent development of its mobile Forward Revenue Growth (5-yr) 31.9% Price / FV = Current Stock Price divided by Estimated Fair Value product offering, category-specific verticalization Forward EPS Growth (5-yr) -569.5% capabilities to gain wallet share, and continuing to Financial Summary ----- Actual ----- Projected NMF = Not Meaningful; Est. = Estimated; FY = Fiscal Year expand and develop its relationship with large retail Fiscal Year End: Dec-19 Dec-20 Dec-21 Returns Summary 3-year Historical Average brands. Revenue 2,296 3,973 6,853

Return on Equity -8.5%• Growth in key areas of Mercadolibre's business has Revenue, YoY% 59.4% 73.0% 72.5% Return on Assets -2.3%been explosive in recent years. GMV has grown at a Operating Income -153 128 276 ROIC, with goodwill 46.6%robust pace of late. Economic uncertainty in key Operating Margin % -6.7% 3.2% 4.0% ROIC, without goodwill 50.3%markets can impact results. Additionally, Amazon Net Income -172 -1 127 ROIC = Return on Invested Capital; NMF = Not Meaningful seeks to grow its Brazilian operations and could prove Net Income Margin % -7.5% 0.0% 1.8% to be a significant competitor in an important market. Leverage, Coverage, and Liquidity Diluted EPS -3.53 -0.02 2.49 In Millions of USD • The Latin American e-commerce industry is growing Diluted EPS, YoY % 325.1% -99.4% NMF Total Debt 1,409at a brisk clip and the industry’s promising outlook Free Cash Flow (CFO-capex) 314 936 1,413 Net Debt -2,340underpins our optimistic assumptions regarding Free Cash Flow Margin % 13.7% 23.6% 20.6% Total Debt/EBITDA 6.0 Mercadolibre’s future revenue growth and potential In Millions of USD (except for per share items) room for margin expansion. Net Debt/EBITDA NMF LARGE-C EBITDA/Interest 2.2 Structure of the Financial Tech Services Industry EXCELLENT Current Ratio 1.5 The financial tech services industry is primarily composed of firms that generate revenue by charging fees to customers for Quick Ratio 1.0 providing transaction processing and other payment-related services. Constituents operate in a rapidly-evolving NMF = Not Meaningful legal/regulatory environment, particularly with respect to interchange fees, data protection, and information security. Several participants benefit from a significant competitive advantage – the network effect. As more consumers use credit/debit cards, more merchants accept them, thereby creating a virtuous cycle. The industry is one of the most attractive in our coverage.

The information and data contained in this report is not represented or warranted to be timely, complete, accurate, or correct. This report is for informational purposes only and should not be considered a solicitation to buy or sell a security. Before acting on any information in this report, you should consider whether the information is suitable for your particular circumstances and, if necessary, seek professional advice. Assumptions, opinions, and estimates are based on our judgment as of the date of the report and are subject to change without notice. Valuentum is not responsible for any errors or omissions or for results obtained from the use of this report. Redistribution is prohibited without written permission. To license Valuentum research, contact us at [email protected]. Page 1 Valuentum Retail Equity Research (10=best) Data as of 9-Sep-2021

ValueCreation™ EXCELLENT Adjusted Return on Invested Capital (ROIC) The best measure of a firm's ability to create value for shareholders is expressed by comparing its return on invested capital (ROIC) with its weighted average cost of 200.0% capital (WACC). The gap or difference between ROIC and WACC is called the firm's 180.0% economic profit spread. Mercadolibre's 3-year historical return on invested capital 176.0% (without goodwill) is 50.3%, which is above the estimate of its cost of capital of 9.1%. 160.0% As such, we assign the firm a ValueCreation™ rating of EXCELLENT. In the chart to 140.0% the right, we show the probable path of ROIC in the years ahead based on the estimated 118.1% volatility of key drivers behind the measure. The solid grey line reflects the most likely 120.0% outcome, in our opinion, and represents the scenario that results in our fair value estimate. 100.0% 79.0% ROIC - WACC Spread, 3-year historical average 41.2% 80.0% 60.3% ROIC - WACC Spread, 5-year projected average 87.4% 60.0% 50.1% These spreads equal the firm's annual average ROIC (excluding goodwill) less its WACC.

40.0% ValueTrend™ POSITIVE 21.8% Mercadolibre receives a ValueTrend™ rating of POSITIVE, which is based on the 20.0% company's trailing three-year performance. The firm's ROIC (excluding goodwill) WACC, 9.1% 0.0% increased to 79% last year from its trailing 3-year average of 50.3%. We expect ROIC (excluding goodwill) to be in the ballpark of about 118% by the end of our discrete forecast period, with upside potential to about 176% over that time period.

Weighted Average Cost of Capital (WACC) The graph above shows the firm's ROIC (excluding goodwill) compared with historical averages and its WACC. Adjusted ROIC Calculation ------Actual ------Capital Structure 1.5% Equity Fiscal Year End: Dec-18 Dec-19 Dec-20 Debt Preferred Earnings before Interest Operating Income after Depreciation -70 -153 128 - Adjusted Taxes (at 25% of EBIT) -18 -38 32 + Amortization 0 0 0 98.5% + Non-cash Operating Items 222 550 1,079 - Minority Interest 0 0 0 Earnings before Interest 170 435 1,175

Cost of Equity Invested Capital Risk Free Rate Assumption4.3% Inventories 0 0 0 Fundamental Beta (ERP multiplier)0.8 + Receivables 0 0 0 Estimated Equity Risk Premium6.5% + Current Deferred Income Taxes 0 0 0 Cost of Equity Assumption 9.2% + Other Current Assets 585 741 1,598 + Property, Plant and Equipment, Net 166 244 392 After-tax Cost of Debt + Goodwill, Net (Cost in Excess) 89 88 85 Risk Free Rate Assumption4.3% + Intangibles 0 0 0 Synthetic Credit Spread5.00% + Non Current Deferred Income Taxes 0 0 0 Cost of Debt Assumption9.3% - Accounts Payable 0 0 0 Cash Tax Rate Assumption25.0% - Other Current Liabilities 0 0 0 After-tax Cost of Debt Assumption 7.0% Invested Capital, with goodwill 840 1,073 2,075 Cost of Preferred Stock Invested Capital, without goodwill 751 985 1,990 Preferred Dividends 0 Value of Preferred Stock 0 Return on Invested Capital, with goodwill 19.5% 45.5% 74.7% Cost of Preferred Assumption NA Return on Invested Capital, without goodwill 21.8% 50.1% 79.0% In Millions of USD

Weighted Average Cost of Capital (WACC) 9.1% Note: Valuentum may provide an adjusted ROIC measure to better reflect the economic substance ERP = Equity Risk Premium of a company's operations, as in the case of companies with negative invested capital.

The information and data contained in this report is not represented or warranted to be timely, complete, accurate, or correct. This report is for informational purposes only and should not be considered a solicitation to buy or sell a security. Before acting on any information in this report, you should consider whether the information is suitable for your particular circumstances and, if necessary, seek professional advice. Assumptions, opinions, and estimates are based on our judgment as of the date of the report and are subject to change without notice. Valuentum is not responsible for any errors or omissions or for results obtained from the use of this report. Redistribution is prohibited without written permission. To license Valuentum research, contact us at [email protected]. Page 2 Valuentum Retail Equity Research (10=best) Data as of 9-Sep-2021

Revenue Growth AGGRESSIVE Projected Revenue (in millions of USD) Source: Company Filings, Valuentum Projections Last Fiscal 25,000 Year 3-year Historical 5-year Projected 21,876 Revenue CAGR CAGR

Mercadolibre USD 3,973 41.6% 31.9% 20,000

Monster Beverage USD 4,599 10.9% 11.3% 15,865 Roku USD 1,778 51.4% 36.3% 15,000

Wayfair USD 14,145 44.2% 10.9%

Zoom Video USD 2,651 159.6% 31.4% 10,000 9,855 Peer Median 47.8% 21.4% 3,973 Industry Median 21.3% 18.9% 5,000 2,296 Mercadolibre's revenue expansion has trailed the median of its peer group but has been 1,440 greater than that of its industry group during the past three years. We expect the firm's revenue expansion to outpace the median of its peer group and industry group during 0 the next five years. Our growth assessment of each firm is based on the firm's5-year forward revenue CAGR. Mercadolibre's future pace of revenue growth is AGGRESSIVE, in our opinion. In the chart above, we show our baseline forecast for revenue as well as potential upside and downside cases.

EBITDA Growth Projected EBITDA (in millions of USD) Source: Company Filings, Valuentum Projections Last Fiscal 4,692 Year 3-year Historical 5-year Projected 5,000 EBITDA CAGR CAGR 4,000 Mercadolibre USD 233 7.8% 75.8% 3,910

Monster Beverage USD 1,694 10.7% 13.4% 3,000 3,128 Roku USD 67 -267.4% 78.8%

Wayfair USD 780 -276.2% 9.7% 2,000 Zoom Video USD 793 384.4% 38.6%

Peer Median -128.3% 26.0% 1,000 233 Industry Median 10.5% 13.0% -24 -80 Mercadolibre's EBITDA expansion has been greater than that of its peer group but has 0 trailed that of its industry group during the past three years. We expect thefirm's EBITDA expansion to outpace its peer group and industry group during the next five -1,000 years.Roku sports the highest expected EBITDA growth rate among peers.

In the chart above, we show our baseline forecast for EBITDA as well as potential upside and downside cases.

Net Income Growth Projected Net Income (in millions of USD) Source: Company Filings, Valuentum Projections Last Fiscal 3,500 Year Net 3-year Historical 5-year Projected 3,045 Income CAGR CAGR 3,000

Mercadolibre USD -1 -141.5% -579.6% 2,500 2,538 Monster Beverage USD 1,410 19.8% 11.5% 2,000 2,030 Roku USD -18 -34.3% -321.0%

Wayfair USD 185 -191.1% 21.1% 1,500

Zoom Video USD 672 -533.7% 40.5% 1,000

Peer Median -112.7% 16.3% 500 -37 -1 Industry Median 8.5% -23.2% -172 0

Mercadolibre's net income expansion has trailed both that of its peer group and its -500 industry group during the past three years. We expect the firm's pace of net income growth to fall below that of both its peer group and industry group during thenextfive years. Zoom Video sports the highest net income growth rate among peers. In the chart above, we show our baseline forecast for net income as well as potential upside and downside cases.

The information and data contained in this report is not represented or warranted to be timely, complete, accurate, or correct. This report is for informational purposes only and should not be considered a solicitation to buy or sell a security. Before acting on any information in this report, you should consider whether the information is suitable for your particular circumstances and, if necessary, seek professional advice. Assumptions, opinions, and estimates are based on our judgment as of the date of the report and are subject to change without notice. Valuentum is not responsible for any errors or omissions or for results obtained from the use of this report. Redistribution is prohibited without written permission. To license Valuentum research, contact us at [email protected]. Page 3 Valuentum Retail Equity Research (10=best) Data as of 9-Sep-2021

Mercadolibre MELI FAIRLY VALUED Buying Index™ 6 Value Rating Economic Castle Estimated Fair Value Fair Value Range Investment Style Sector Industry Very Attractive $1887.00 $1415.00 - $2359.00 LARGE-CAP BLEND Next Generation Disruptive Innovation Cash Flow and Financial Leverage Analysis

Cash Flow Generation STRONG Financial Leverage HIGH Cash from Operations Capital Expenditures Free Cash Flow 40 Mercadolibre - 30 normalized leverage, 32.77 20 10 1,183 936 0 -10 12/31/2018 12/31/2019 12/31/2020 -20 -30 314 247 451 -40 93 138 137 231 Mercadolibre- annual leverage Mercadolibre - normalized leverage Medium Threshold HighThreshold Dec-18 Dec-19 Dec-20 The bars above show the firms operating cash flow, capital expenditures, and free cash flow, respectively. The bars above show the firm's annual debt-to-EBITDA. The red line shows the firm's normalized measure. Firms that generate a free cash flow margin (free cash flow divided by total revenue) Firms that exhibit high leverage tend to be more risky than firms with relatively low above 5% are usually considered cash cows. Mercadolibre's free cash flow margin has debt loads, all else equal. We measure financial leverage by taking a firm's current averaged about 15.6% during the past 3 years. As such, we think the firm's cash flow total debt load and dividing it by the firm's trailing average 3-year annualEBITDA. generation is relatively STRONG. The free cash flow measure shown above is derived Firms that are over 3 for this metric, we rate as having high leverage. Companies that by taking cash flow from operations less capital expenditures and differs from have less than 1.5 turns of leverage (or a measure below 1.5), we rate as having low enterprise free cash flow (FCFF), which we use in deriving our fair value estimate for leverage. Mercadolibre's normalized debt-to-EBITDA measure of about 32.77 puts it the company. For more information on the differences between these two measures, in the HIGH camp. please visit our website at Valuentum.com. At Mercadolibre, cash flow from operations increased about 412% from levels registered two years ago, while capital expenditures expanded about 166% over the same time period.

Cash Flow from Operations Projected Operating Cash Flow (in millions of USD) Source: Company Filings, Valuentum Projections

8,000 Last Fiscal 3-year Historical 5-year Projected 6,991 Year CFO CAGR CAGR 7,000

Mercadolibre USD 1,183 84.3% 31.8% 6,000 Monster Beverage USD 1,364 11.3% 14.5% 5,000 4,701 Roku USD 148 -195.5% 58.2% 4,000 Wayfair USD 1,417 112.2% 8.9% 3,000 Zoom Video USD 1,471 323.1% 26.2% 2,412 2,000 1,183 Peer Median 61.8% 20.4% 1,000 231 451 Industry Median 12.2% 17.7% 0 Mercadolibre's cash flow from operations expansion has been greater than that of both its peer group and industry group during the past three years. We expect the firm's cash flow from operations expansion to outpace its peer group and industry group during the next five years. Roku sports the highest expected cash flow from operationsgrowthrate In the chart above, we show our baseline forecast for CFO as well as potential upside and downside cases. among peers.

Free Cash Flow (CFO-capital expenditures) Projected Free Cash Flow (in millions of USD) Source: Company Filings, Valuentum Projections

Last Fiscal 3-year Historical 5-year Projected 6,000 5,022 Year FCF CAGR CAGR Source: Company Filings, Valuentum Projections 5,000 Mercadolibre USD 936 91.2% 32.8%

Monster Beverage USD 1,315 13.7% 14.3% 4,000 3,863 Roku USD 66 -346.5% 76.4% 3,000 Wayfair USD 1,231 -355.0% 6.1% 2,704

Zoom Video USD 1,391 293.1% 26.3% 2,000 936 Peer Median -166.4% 20.3% 1,000 314 138 Industry Median 12.1% 17.1% 0 Mercadolibre's free cash flow expansion has been greater than that of both its peer group and industry group during the past three years. We expect the firm's free cash flow expansion to outpace its peer group and industry group during the next five years. Roku sports the highest expected free cash flow growth rate among peers. In the chart above, we show our baseline forecast for free cash flow as well as potential upside and downside cases.

The information and data contained in this report is not represented or warranted to be timely, complete, accurate, or correct. This report is for informational purposes only and should not be considered a solicitation to buy or sell a security. Before acting on any information in this report, you should consider whether the information is suitable for your particular circumstances and, if necessary, seek professional advice. Assumptions, opinions, and estimates are based on our judgment as of the date of the report and are subject to change without notice. Valuentum is not responsible for any errors or omissions or for results obtained from the use of this report. Redistribution is prohibited without written permission. To license Valuentum research, contact us at [email protected]. Page 4 Valuentum Retail Equity Research (10=best) Data as of 9-Sep-2021

Valuation Assumptions Valuation Breakdown In Millions of USD (except for per share items) 5-year Projections In the chart below, we show the build up to our estimate of total enterprise value for Revenue CAGR % 31.9% Mercadolibre and the break down to the firm's total equity value, which we estimate Avg. EBIT Margin % 12.2% to be about 93.86USD billion. The present value of the enterprise free cash flows Avg. Cash Tax Rate % 25.0% generated during each phase of our model and the net balance sheet impact is Earnings Before Interest CAGR % 30.0% displayed. We divide total equity value by diluted shares outstanding to arrive at our Earnings Per Share CAGR % -569.5% $1887 per share fair value estimate. Free Cash Flow to the Firm CAGR % 30.7% Earnings before interest = Net operating profits less adjusted taxes Long-term Projections Phase II --> III FCFF CAGR % 8.6% (II) 3% (III) 100,000 2,340 Cost of Equity % 9.2% 90,000 After-tax Cost of Debt % 4.4% 80,000 Discount Rate (WACC) % 9.1% 70,000 39,939 Synthetic credit spread = 5% Results Phase I Present Value 9,146 60,000 50,000 Phase II Present Value 42,432 93,856 Phase III Present Value 39,939 40,000 Total Firm Value 91,516 30,000 42,432 Net Balance Sheet Impact 2,340 20,000 10,000 Total Equity Value 93,856 9,146 0 Diluted Shares Outstanding 49.7 Yr 1-5 Yr 6-20 Perpetuity Net Balance Sheet Equity Value Fair Value per Share $1,887.00 Impact In Millions of USD

DCF Valuation Summary Enterprise Free Cash Flow ------Actual ------Fiscal Year End: 12/31/2018 12/31/2019 12/31/2020 We think Mercadolibre is worth $1887 per share with a fair value range of $1415.00 Earnings before Interest 170 435 1,175 - $2359.00. The margin of safety around our fair value estimate is driven by the firm's + Depreciation 46 73 105 MEDIUM ValueRisk™ rating, which is derived from an evaluation of the historical - Capital Expenditures 93 137 247 volatility of key valuation drivers and a future assessment of them. Our near-term - Change in Working Capital 000 operating forecasts, including revenue and earnings, do not differ much from consensus - Acquisitions 0 0 0 estimates or management guidance. Our model reflects a compound annual revenue Enterprise Free Cash Flow (FCFF) 123 371 1,033 growth rate of 31.9% during the next five years, a pace that is lower than the firm's 3- In Millions of USD year historical compound annual growth rate of 41.6%. Our model reflects a 5-year Our future forecasts for key valuation drivers result in a future free enterprise cash projected average operating margin of 12.2%, which is above Mercadolibre's trailing 3- flow stream. Above, we show how we calculate enterprise free cash flow and the year average. Beyond year 5, we assume free cash flow will grow at an annual rate of historical performance of the metric for Mercadolibre. Over the next five years, we 8.6% for the next 15 years and 3% in perpetuity. For Mercadolibre, we use a 9.1% expect the firm's enterprise free cash flow to expand at about a 31% compound weighted average cost of capital to discount future free cash flows. annual growth rate. During years 6 through 20, we expect the measure to grow at a 8.6% rate. Beyond year 20 (in perpetuity), we grow the firm's free cash flow at inflation (3%).

Source: Company Filings, Valuentum Projections Company Metrics versus Peer and Industry Medians

Price/Earnings-to- 5-year Forward 3-year Hist Avg Stock Price / Valuentum Buying Forward Price-to- P/E on Est. Normal Diluted Growth (PEG), 5- EV/Est. Normal Earnings per ROIC, without Dividend Yield Fair Value Company Name Index™ Earnings EPSyear Forward EV/EBITDA EBITDA Share CAGR goodwill % Estimate

Mercadolibre 6 NMF91.1 NMF 199.8 47.9 -569.5% 50.3% 0.0% 99.8%

Monster Beverage 7 36.325.9 2.7 26.4 19.9 13.7% 62.9% 0.0% 95.4%

Roku 3 720.3146.2 NMF 225.5 65.2 -300.2% -64.0% 0.0% 97.3%

Wayfair 3 60.149.0 7.5 24.0 20.5 19.3% 42.7% 0.0% 86.7%

Zoom Video 3 64.541.7 3.5 52.9 33.5 38.3% Negative IC 0.0% 83.0%

Peer Median 3.0 62.345.3 3.5 39.7 27.0 16.5% 42.7% 0.0% 91.0%

Industry Median 5.0 32.741.8 2.4 21.7 26.1 -26.0% 22.0% 0.0% 96.3% View back of report for a full list of industry constituents covered by Valuentum. VBI: Valuentum's ranking for the attractiveness of this investment at the date of the report.

The information and data contained in this report is not represented or warranted to be timely, complete, accurate, or correct. This report is for informational purposes only and should not be considered a solicitation to buy or sell a security. Before acting on any information in this report, you should consider whether the information is suitable for your particular circumstances and, if necessary, seek professional advice. Assumptions, opinions, and estimates are based on our judgment as of the date of the report and are subject to change without notice. Valuentum is not responsible for any errors or omissions or for results obtained from the use of this report. Redistribution is prohibited without written permission. To license Valuentum research, contact us at [email protected]. Page 5 Valuentum Retail Equity Research (10=best) Data as of 9-Sep-2021

Range of Potential Outcomes ValueRisk™ MEDIUM $1,887 Mercadolibre receives a ValueRisk™ rating of MEDIUM based of the historical volatility of key drivers of economic value creation. The fair value range sets the margin of safety around our fair value estimate of the firm's shares. Revenue Volatility 30.3% Gross Margin Volatility 27.7% $1,415 $2,359 Earnings (EBI) Volatility 39.2% Cash Flow (FCFF) Volatility 39.6% Fair Value Range 25.0% The Fair Value Range sets the premium or discount on our estimate of the firm's fair value.

Upside and Downside Probabilities Probability (fair value < $0) Less than 0.1% -500 0 500 1000 1500 2000 2500 3000 3500 4000 Probability (fair value > 2x current share price) 0.00%

Our discounted cash flow process values each firm on the basis of the presentvalueof We strive to answer a few questions that investors often ask: 1) What are the chances all future free cash flows. Although we estimate the firm's fair value at about $1887 per of a total loss of investment in this company? and 2) What is the chance that the share, every company has a range of probable fair values that's created by the company is really worth twice what I paid for it? The probability (fair value<0) uncertainty of key valuation drivers (like future revenue or earnings, for example). After strives to answer the first question. It indicates the chance that the firm may all, if the future were known with certainty, we wouldn't see much volatility in the encounter insolvency based on the characteristics of its cash flow stream, capital markets as stocks would trade precisely at their known fair values. Our ValueRisk™ structure, and risk profile. The probability (fair value > 2x current share price) strives rating sets the margin of safety or the fair value range we assign to each stock. In the to answer the second question. It is our best estimate of whether investors are graph above, we show this probable range of fair values for Mercadolibre. We think the participating in a half-off sale by buying the company's shares at current prices. firm is attractive below $1415 per share (the green line), but quite expensive above $2359 per share (the red line). The prices that fall along the yellow line, which includes our fair value estimate, represent a reasonable valuation for the firm, in our opinion.

Future Path of Fair Value We estimate Mercadolibre's fair value at this point in time to be about $1887 per share. As time passes, however, companies generate cash flow and pay out cash to $3,500 shareholders in the form of dividends. The chart to the right compares the firm's current $3,071 share price with the path of Mercadolibre's expected equity value per share over the $3,000 next three years, assuming our long-term projections prove accurate. The range between the resulting downside fair value and upside fair value in Year 3 represents our best $2,500 estimate of the value of the firm's shares three years hence. This range of potential $2,457 Current Share outcomes is also subject to change over time, should our views on the firm's future cash Price, $1,883 flow potential change. The expected fair value of $2457 per share in Year 3 represents $2,000 our existing fair value per share of $1887 increased at an annual rate of the firm's cost $1,842 of equity less its dividend yield. The upside and downside ranges are derived in the $1,500 same way, but from the upper and lower bounds of our fair value estimate range.

$1,000

$500

$0 Current Share Price Yr 1 Fair Value Yr 2 Fair Value Yr 3 Fair Value

The graph above shows the expected future fair value of the firm's shares relative to its current stock price.

The information and data contained in this report is not represented or warranted to be timely, complete, accurate, or correct. This report is for informational purposes only and should not be considered a solicitation to buy or sell a security. Before acting on any information in this report, you should consider whether the information is suitable for your particular circumstances and, if necessary, seek professional advice. Assumptions, opinions, and estimates are based on our judgment as of the date of the report and are subject to change without notice. Valuentum is not responsible for any errors or omissions or for results obtained from the use of this report. Redistribution is prohibited without written permission. To license Valuentum research, contact us at [email protected]. Page 6 Valuentum Retail Equity Research (10=best) Data as of 9-Sep-2021

Technical Evaluation BULLISH Money Flow Index (MFI) NEUTRAL

2,018 90 80 Stock Price 1,918 Overbought Line 76 70 1,818 60 1,718 50 1,618 40 5-week Moving 13-week Moving 1,518 30 34 Average Average 1,418 20 Oversold Line 1,318 10 1,218 0

The firm's near-term moving average (5-week, grey line) and medium-term moving The Money Flow Index (MFI) is an oscillator that uses price and volume to measure average (13-week, red line) are shown in the chart above. Typically, when a shorter- buying and selling pressure. Chartists often look for overbought (above 80) and term moving average crosses a medium- or longer-term moving average from below, it oversold (below 20) levels to warn of unsustainable near-term price extremes. represents a bullish signal. If the short-term moving average crosses from above, traders Mercadolibre's MFI of 76 is neutral, suggesting the firm's stock is neither overbought often view this as bearish. Mercadolibre's 5-week moving average resides above its 13- nor oversold at this time. However, a score over 50 tends to favor bulls. The MFI can week measure, indicating a BULLISH trend. We'd grow wary of the firm's technicals also be used to gauge the strength or weakness of a firm's price trend. In should its 5-week moving average drop below its 13-week moving average, as the Mercadolibre's case, its stock price and money flow neither reveals a bullish nor firm's 30-week uptrend could be threatened if this occurs. bearish divergence, further supporting our neutral view on its money flow action.

30-week Price and Volume Chart (weekly)

- 10-week Moving Average Relative Price Strength STRONG 25,000,000 1,973 A firm's relative price strength can be assessed over any number of time horizons. We 1,873 20,000,000 1,773 show the firm's performance over the past 5 weeks, 13 weeks, and 30 weeks below. 1,673 In arriving at our relative strength rating for each company, we assess the past 13 15,000,000 1,573 weeks, which includes the market's reaction to the firm's most recently reported 10,000,000 1,473 quarter, where applicable, and other more recent economic events. During the past 13 1,373 weeks, Mercadolibre's shares returned 28.2%, while the market benchmark returned 5,000,000 1,273 1,173 7.5%. We think Mercadolibre's 13-week relative price performance is STRONG. 0 1,073

5-week Company Performance 1.8% In the chart above, we pinpoint the heaviest accumulation or distribution week of the 5-week Market Benchmark Performance 2.6% firm, determined by the week with the highest trading volume during the past 30 weeks. 5-week Relative Performance vs. Market Benchmark -0.8% A heavy accumulation (buying) or distribution (selling) week often determines the 13-week Company Performance 28.2% future near-term direction of the firm's share price, as money managers continue to 13-week Market Benchmark Performance 7.5% move in or out of the stock in the days and weeks ahead driving the stock up or down, respectively. For Mercadolibre, the week with the highest trading volume out of the last 13-week Relative Performance vs. Market Benchmark 20.7% 30 weeks was a week of heavy selling, or distribution (red bar). Such market activity 30-week Company Performance 0.3% could indicate a reversal of an uptrend or further confirmation of a downtrend. 30-week Market Benchmark Performance 17.5% 30-week Relative Performance vs. Market Benchmark -17.3%

Upside/Downside Volume BULLISH Timeliness Matrix™ Equity Valuation 3.5 Relative Strength Overvalued Fairly Valued Undervalued 3.2 3.0 Strong 2.5 1 2.0 Neutral 1.5 Average, 1.5 1.0 Weak 0.5 0.6 0.0 Firms that are undervalued and currently showing near-term pricing strength score near the top right of the matrix. Companies that are undervalued and showing near-term relative price strength could represent timely buys, as the stock may be attractive to both value and momentum The level and trend of the Upside/Downside (U/D) volume ratio reveals whether investors. A cross section of the firm's equity valuation and its relative share price institutional participation has been bullish or bearish as of late. Mercadolibre's U/D strength is shown in the matrix above. We tend to prefer undervalued stocks that have volume ratio of 3.2 is not only greater than 1 but also is better than its trailing average, strong pricing momentum, also called Valuentum stocks. indicating BULLISH institutional interest during the past several weeks.

The information and data contained in this report is not represented or warranted to be timely, complete, accurate, or correct. This report is for informational purposes only and should not be considered a solicitation to buy or sell a security. Before acting on any information in this report, you should consider whether the information is suitable for your particular circumstances and, if necessary, seek professional advice. Assumptions, opinions, and estimates are based on our judgment as of the date of the report and are subject to change without notice. Valuentum is not responsible for any errors or omissions or for results obtained from the use of this report. Redistribution is prohibited without written permission. To license Valuentum research, contact us at [email protected]. Page 7 Valuentum Retail Equity Research (10=best) Data as of 9-Sep-2021

Total Revenue 1,4402,296 3,973 6,853 9,197

Cost of Goods Sold 7431,194 2,264 3,873 5,066

Selling, General and Administrative Expenses 6201,031 1,229 2,102 2,750

Other Operating Expenses 147224 352 602 788

Operating Income (70)(153) 128 276 593

Unusual items 000 00

Operating Income, including unusual items (70)(153) 128 276 593

Interest Expense (56)(66) (107) (107) (107)

Other Non-operating Income 60112 60 00

Pre-tax Income (66)(107) 81 169 486

Income Taxes (29)65 82 42 121

Income after tax (37)(172) (1) 127 364

Minority Interest and Equity Income 000 00

Net Income, excluding extra items (37)(172) (1) 127 364

Income Available to Common, excluding extra items (37)(172) (1) 127 364

Diluted Earnings per Share, excluding extra items (0.83)(3.53) (0.02) 2.49 7.02

Diluted Weighted Shares Outstanding 44.548.7 49.7 50.8 51.9

Source: Company Filings, Xignite, Valuentum Projections

Note: Pro forma data in discounted cash-flow valuation may reflect significant adjustments from GAAP accounting data, including cash (not effective) tax rates and other analytical adjustments on a backward-looking and forward-looking basis. No individual data, by itself, found in this report should be used to make any investment decision.

The information and data contained in this report is not represented or warranted to be timely, complete, accurate, or correct. This report is for informational purposes only and should not be considered a solicitation to buy or sell a security. Before acting on any information in this report, you should consider whether the information is suitable for your particular circumstances and, if necessary, seek professional advice. Assumptions, opinions, and estimates are based on our judgment as of the date of the report and are subject to change without notice. Valuentum is not responsible for any errors or omissions or for results obtained from the use of this report. Redistribution is prohibited without written permission. To license Valuentum research, contact us at [email protected]. Page 8 Valuentum Retail Equity Research (10=best) Data as of 9-Sep-2021

Assets Total Cash (including marketable securities) 9263,048 3,749 7,178 10,818 Inventory 000 00 Accounts Receivable 000 00 Other Current Assets 585741 1,598 1,598 1,598 Total Current Assets 1,5113,789 5,347 8,776 12,416 Gross Fixed Assets 298432 645 1,090 1,712 (Accumulated Depreciation) (132)(188) (253) (434) (677) Net Property, Plant, and Equipment 166244 392 655 1,035 Goodwill, Net 8988 85 85 85 Intangibles, Net 000 00 Other Long-term Assets 474661 702 702 702 Total Assets 2,2404,782 6,526 10,218 14,238

Liabilities Accounts Payable 000 00 Other Current Liabilities 1,0331,566 3,088 3,088 3,088 Current Portion of Long-term Debt 133186 548 548 548 Total Current Liabilities 1,1661,752 3,636 3,636 3,636 Long-term Debt 602631 861 861 861 Other Long-term Liabilities 135317 378 378 378 Total Liabilities 1,9032,700 4,875 4,875 4,875

Preferred Stock 000 00

Shareholders' Equity Common Stock and Additional Paid in Capital 2252,068 1,861 3,876 5,935 Retained Earnings 503323 314 441 805 Other Equity (391)(309) (524) 1,026 2,623 Total Shareholders' Equity 3372,082 1,651 5,343 9,363

Total Liabilities and Shareholders' Equity 2,2404,782 6,526 10,218 14,238

Source: Company Filings, Xignite, Valuentum Projections

The information and data contained in this report is not represented or warranted to be timely, complete, accurate, or correct. This report is for informational purposes only and should not be considered a solicitation to buy or sell a security. Before acting on any information in this report, you should consider whether the information is suitable for your particular circumstances and, if necessary, seek professional advice. Assumptions, opinions, and estimates are based on our judgment as of the date of the report and are subject to change without notice. Valuentum is not responsible for any errors or omissions or for results obtained from the use of this report. Redistribution is prohibited without written permission. To license Valuentum research, contact us at [email protected]. Page 9 Valuentum Retail Equity Research (10=best) Data as of 9-Sep-2021

Cash from Operations Net Income (37)(172) (1) 127 364 Depreciation and Amortization 4673 105 181 243 Deferred Income Taxes 000 00 Operating Gains Or Losses 222550 1,079 1,550 1,597 Changes in Working Capital 000 00 Cash Flow from Operations 231451 1,183 1,858 2,204

Cash from Investing Purchase of Property, Plant, Equipment (93)(137) (247) (445) (622) Other Investing Cash Flows (579)(1,311) (5) 00 Cash Flow from Investing (672)(1,448) (252) (445) (622)

Cash from Financing Issuance (Retirement) of Stock 000 2,015 2,059 Issuance (Retirement) of Debt 000 00 Dividends Paid (7)0 0 00 Other Financing Cash Flows 6152,022 242 00 Cash Flow from Financing 6082,022 242 2,015 2,059

Foreign Exchange (91)(38) (116) 00

Net Change in Cash 76987 1,057 3,429 3,640

Source: Company Filings, Xignite, Valuentum Projections

The information and data contained in this report is not represented or warranted to be timely, complete, accurate, or correct. This report is for informational purposes only and should not be considered a solicitation to buy or sell a security. Before acting on any information in this report, you should consider whether the information is suitable for your particular circumstances and, if necessary, seek professional advice. Assumptions, opinions, and estimates are based on our judgment as of the date of the report and are subject to change without notice. Valuentum is not responsible for any errors or omissions or for results obtained from the use of this report. Redistribution is prohibited without written permission. To license Valuentum research, contact us at [email protected]. Page 10 Valuentum Retail Equity Research (10=best) Data as of 9-Sep-2021

Disruptive Innovation FAIRLY VALUED 102%

We think the Disruptive Innovation industry is fairly valued at this time. The industry's 100% market cap is trading between 80% and 120% of our estimate of its fair value based on 99.8% our DCF process. Although we use a firm-specific ValueRisk™ measure to determine 98% whether a firm is undervalued or overvalued based on our DCF process, we consider an 96% 96.3% industry to be undervalued if it is trading below 80% of our estimate of its fair value 94% and overvalued if it is trading at over 120% of our estimate of its fair value. We think 92% these fair value ranges are appropriate given the diversification benefits of holding a basket of stocks. Although there may be individual opportunities within the Disruptive 90% 91.0% Innovation industry, we don't find the industry as a whole attractive basedsolelyon 88% valuation. 86%

Mercadolibre Peer Median Disruptive Innovation

The above bar chart reveals the price/fair value of the company, its peers, and the industry as a whole.

Shaded blue denotes that the firm has earned the highest rating for that respective category.

Market Cap (USD- Company Name Ticker mil)Investment Style DCF Valuation Relative Valuation ValueCreation™ ValueRisk™ ValueTrend™ Technicals Relative Strength

Beyond Meat BYND 7,011MID-CAP GROWTH FAIRLY VALUED NEUTRAL VERY POOR HIGH POSITIVE BEARISH WEAK

Boston Beer SAM 6,871MID-CAP BLEND FAIRLY VALUED ATTRACTIVE EXCELLENT MEDIUM POSITIVE NEUTRAL WEAK

Carvana Co. CVNA 21,372LARGE-CAP GROWTH FAIRLY VALUED NEUTRAL VERY POOR HIGH POSITIVE VERY BEARISH STRONG

CRISPR Therapeutics CRSP 7,865MID-CAP BLEND FAIRLY VALUED NEUTRAL VERY POOR HIGH NEGATIVE BEARISH WEAK

Crocs CROX 9,525MID-CAP BLEND FAIRLY VALUED NEUTRAL EXCELLENT HIGH NEGATIVE BULLISH STRONG

DocuSign DOCU 52,611LARGE-CAP BLEND FAIRLY VALUED UNATTRACTIVE EXCELLENT MEDIUM POSITIVE VERY BEARISH NEUTRAL

ETSY ETSY 29,423LARGE-CAP GROWTH FAIRLY VALUED NEUTRAL EXCELLENT HIGH POSITIVE BULLISH STRONG

First Solar FSLR 10,378LARGE-CAP VALUE FAIRLY VALUED ATTRACTIVE VERY POOR MEDIUM NEGATIVE BULLISH STRONG

Fiverr International FVRR 5,929MID-CAP BLEND FAIRLY VALUED UNATTRACTIVE VERY POOR MEDIUM POSITIVE BEARISH WEAK

GameStop GME 11,784LARGE-CAP CORE OVERVALUED NEUTRAL EXCELLENT VERY HIGH NEGATIVE VERY BEARISH WEAK

Global Payments GPN 52,206LARGE-CAP VALUE FAIRLY VALUED ATTRACTIVE EXCELLENT LOW NEGATIVE NEUTRALWEAK

IntercontinentalExchange ICE 66,689LARGE-CAP CORE FAIRLY VALUED ATTRACTIVE EXCELLENT LOW NEGATIVE BULLISH NEUTRAL

JD.com JD 124,765LARGE-CAP BLEND FAIRLY VALUED ATTRACTIVE POOR MEDIUM NEGATIVE BULLISH STRONG

Lululemon LULU 55,059LARGE-CAP GROWTH FAIRLY VALUED NEUTRAL EXCELLENT MEDIUM NEGATIVE BULLISH STRONG

Mercadolibre MELI 93,682LARGE-CAP BLEND FAIRLY VALUED UNATTRACTIVE EXCELLENT MEDIUM POSITIVE BULLISH STRONG

Monster Beverage MNST 50,498LARGE-CAP BLEND FAIRLY VALUED ATTRACTIVE EXCELLENT MEDIUM POSITIVE BULLISH WEAK

NASDAQ NDAQ 33,037LARGE-CAP CORE FAIRLY VALUED ATTRACTIVE EXCELLENT LOW POSITIVE BULLISH STRONG

Palo Alto PANW 45,204LARGE-CAP GROWTH FAIRLY VALUED UNATTRACTIVE EXCELLENT MEDIUM NEGATIVE NEUTRAL STRONG

Penn National PENN 11,247LARGE-CAP GROWTH FAIRLY VALUED UNATTRACTIVE POOR MEDIUM NEGATIVE BULLISH STRONG

Pinterest PINS 32,866LARGE-CAP BLEND FAIRLY VALUED UNATTRACTIVE VERY POOR MEDIUM NEGATIVE BEARISH WEAK

Proto Labs PRLB 1,999SMALL-CAP VALUE FAIRLY VALUED ATTRACTIVE EXCELLENT MEDIUM NEGATIVE BEARISH WEAK

Roku ROKU 41,488LARGE-CAP BLEND FAIRLY VALUED UNATTRACTIVE VERY POOR MEDIUM POSITIVE BEARISH WEAK

ServiceNow NOW 131,649LARGE-CAP GROWTH FAIRLY VALUED NEUTRAL EXCELLENT MEDIUM POSITIVE NEUTRAL STRONG

Slack Tech WORK 17,512LARGE-CAP BLEND FAIRLY VALUED NEUTRAL VERY POOR MEDIUM POSITIVE BULLISH STRONG

Snap SNAP 109,606LARGE-CAP BLEND FAIRLY VALUED UNATTRACTIVE VERY POOR MEDIUM POSITIVE BULLISH STRONG

Splunk SPLK 24,783LARGE-CAP BLEND FAIRLY VALUED NEUTRAL GOOD MEDIUM NEGATIVE NEUTRAL STRONG

Stitch Fix SFIX 3,960MID-CAP BLEND FAIRLY VALUED UNATTRACTIVE EXCELLENT MEDIUM NEGATIVE BEARISH WEAK

Teradyne TER 22,335LARGE-CAP CORE FAIRLY VALUED ATTRACTIVE EXCELLENT MEDIUM POSITIVE BEARISH WEAK

Uber UBER 70,098LARGE-CAP BLEND FAIRLY VALUED NEUTRAL VERY POOR VERY HIGH POSITIVE BEARISH WEAK

VeriSign VRSN 25,504LARGE-CAP GROWTH FAIRLY VALUED ATTRACTIVE EXCELLENT MEDIUM NEGATIVE BEARISH WEAK

Verisk VRSK 33,942LARGE-CAP CORE FAIRLY VALUED ATTRACTIVE EXCELLENT MEDIUM POSITIVE NEUTRAL STRONG

Virgin Galactic SPCE 5,561MID-CAP BLEND FAIRLY VALUED NEUTRAL POOR VERY HIGH NEGATIVE BEARISH WEAK

Wayfair W 26,700LARGE-CAP BLEND FAIRLY VALUED UNATTRACTIVE EXCELLENT MEDIUM POSITIVE BEARISH WEAK

Zoom Video ZM 90,828LARGE-CAP BLEND FAIRLY VALUED UNATTRACTIVE GOOD MEDIUM POSITIVE BEARISH WEAK

B Valuentum Buying Index (VBI) C Valuentum Value Rating (VVR) D Investment Considerations Provides insight into the timeliness Indicates whether we think a firm Evaluates firms on 12 is undervalued, fairly valued, or different measures, from the DCF Valuation of an investment opportunity. We A rank firms from 1 to 10 based on overvalued on the basis of our firm's growth and cash flow Shows whether the rigorous fiancial, valuation, and DCF process. generation to the stock's firm is undervalued, money flow index and fairly valued, or technical analysis. A 10 represents one of our top picks. upside/downside volume. We overvalued based on VBI Sco re Action reveal technical support and our DCF process 10 Top Pick resistance levels. and by how much. 9 We'd Consider Buying 6 to 8 Constructive (add/trim) 3 to 6 Less Exciting (add/trim) 1 to 2 We'd Consider Selling

E 30-week Price and Volume Action A B C Displays the last accumulation or H Business Quality distribution week of D Summary of the firm's the stock and ability to create value historical price and for shareholders volume action. compared wth the E underlying risk of its operations.

H G J Investment Highlights G Company Vitals Our opinion of the Shows sector, company, including industry and other analysis of its financial and technical strengths relevant company J information. and weaknesses. K I

N Relative Valuation K Comparison of the L firm's PE, PEG, and Price/FV ratios versus I Normalized EPS peers. and EBITDA M Estimation of the firm's normalized earnings measures and the corresponding valuation mutliples.

Returns Summary L N Financial Summary 3-year averages of M Leverage, Coverage, A summary of the the firm's key return and Liquidity proforma financial measures, including A snapshot of the statements found in return on invested company's financial the extended report. capital, with and health. without goodwill.

@Valuentum, we strive to stand out from the crowd. Most Our analysis doesn’t stop there. We also offer a technical investment research publishers fall into a few camps, evaluation of the stock as well as other momentum whether it be value, growth, income, momentum, chartist indicators. We not only want to reveal to readers which or some variant of the aforementioned. We think each in firms may be undervalued, in our view, but we also want its own right holds merit, but we think the combination of to provide readers with information to help them assess these approaches can be even more powerful. After all, entry and exit points. Most research publishers focus on stock price movements aren’t just driven by investors of arriving at a target price or fair value estimate, but may the value or growth variety, but by all market participants. fall short of providing a technical assessment to bolster Therefore, we look at stocks from a variety of investment buy and sell disciplines. We strive to go the distance and perspectives in order to better understand and identify provide readers with answers--not half the story. ideas. We want to provide relevant information. An explanation of our approach would not be complete if The core of our process is grounded in rigorous discounted we didn’t describe our ideal stock idea. We’re looking cash flow analysis and incorporates the concept of a for companies that are undervalued--both on a DCF basis margin of safety. We offer a fair value estimate for each and versus peers--have strong growth potential, have a company and provide a relative valuation assessment in solid track record of creating economic profits for the context of a company’s industry and closest peers. A shareholders with reasonable risk, are strong cash flow cross section of our ValueCreation™ and ValueRisk™ generators, have manageable financial leverage, and are ratings provides a financial assessment of a company’s currently showing bullish technical and momentum business quality, while our ValueTrend™ rating offers indicators. For dividend growth ideas, we look for insight into the trajectory of a firm’s economic profit companies that have both the capacity and willingness to creation. The Economic Castle rating measures the keep raising the dividend. magnitude of future economic value generation, and the Dividend Cushion ratio assesses the financial capacity of a Can such stock ideas exist? Subscribe to Valuentum to company to keep raising its dividend. receive our best investment ideas and analysis on hundreds of stocks, dividends, ETFs and more.

Valuentum Value Rating (VVR) UNDERVALUED

Financial Discounted Cash FAIRLY VALUED Financial ValueRisk™ Statement Flow Valuation Forecasts Analysis Model Rating OVERVALUED

Historical firm-specific Full annual forecasts of income A complete three-stage free The volatility of key valuation The firm's stock price is compared financial data generates our statement, balance sheet, and cash flow to the firm valuation drivers are estimated and a to the suggested margin of safety. ValueCreation™, ValueRisk™, cash flow statement items. Firm- model generates an estimate margin of safety is If a firm's stock price falls below and ValueTrend™ ratings. The specific cost of equity, cost of of the firm's equity value per determined. the lower bound of our estimated data provides the basis for our debt, weighted average cost of share based on estimated fair value range, it receives financial forecasts. capital, and long-term growth future free cash flows. • Revenue Volatility Valuentum's highest Value Rating. and profitability measures • Margin Volatility estimated. • Earnings Volatility • Cash Flow Volatility

The information and data contained in this report is not represented or warranted to be timely, complete, accurate, or correct. This report is for informational purposes only and should not be considered a solicitation to buy or sell a security. Before acting on any information in this report, you should consider whether the information is suitable for your particular circumstances and, if necessary, seek professional advice. Assumptions, opinions, and estimates are based on our judgment as of the date of the report and are subject to change without notice. Valuentum is not responsible for any errors or omissions or for results obtained from the use of this report. Redistribution is prohibited without written permission. To license Valuentum research, contact us at [email protected]. Page 13 Methodology for Picking Stocks - Valuentum Buying Index™ (VBI)

'bullish' technicals. The firm would need a ValueCreation™ rating of 'good' or 'excellent', exhibit Valuentum, we like to look at companies from a @ 'high' or 'aggressive' growth prospects, and generate at number of different perspectives. The Valuentum Buying least a 'medium' or 'neutral' assessment for cash flow Index (VBI) combines rigorous financial and valuation generation, financial leverage, and relative price strength. analysis with an evaluation of a stock's technicals to derive a rating between 1 and 10 for each company. The VBI This is a tall order for any company. Stocks that don't places considerable emphasis on a company's discounted make the cut for a 10 are ranked accordingly, with the cash-flow (DCF) valuation, its relative valuation versus least attractive stocks, in our opinion, garnering a rating peers (both forward PE and PEG ratios), and its technicals of 1 ("We'd sell"). Most of our coverage universe in order to help readers assess entry and exit points on the registers ratings between 3 and 7, but at any given time most interesting ideas. there could be large number of companies garnering either very high or very low scores, especially at market Let's follow the red line on the flow chart below to see lows or tops, respectively. how a company can score a 10, the best mark on the index (a "Top Pick"). First, the company would need to be The Best Ideas Newsletter portfolio puts the VBI into 'undervalued' on a DCF basis and 'attractive' on a relative practice. value basis. The stock would also have to be exhibiting

Initial Index Score

DCF Fairly DCF Overvalued DCF Undervalued Valued

Relative Value Relative Value Relative Value Relative Value Relative Value Relative Value Unattractive/Neutral Attractive Unattractive/Neutral Attractive Unattractive/Neutral Attractive

Technicals Technicals Technicals Technicals Bullish: 7 Technicals Bullish: 4 Bearish: 3 Bearish: 6 Bearish: 1

Technicals Technicals Neutral: 2 Neutral: 8 Technicals Technicals Bullish: 6 Bearish: 4 Technicals Technicals Bearish: 3 Bullish: 7

Technicals Technicals Technicals Bullish: 9 Bullish: 7 Technicals Bearish: 3 Neutral: 5

Technicals Technicals Neutral: 4 Neutral: 6

VBI Score Action Technicals >= Bullish 10 Top Pick ValueCreation(TM) >= Good Growth >= High 9 We'd Consider Buying Cash Flow Generation >= Medium 6 to 8 Constructive (add/trim) Financial Leverage <= Medium Relative Strength >= Neutral 3 to 6 Less Exciting (add/trim) Final Score: 10 1 to 2 We'd Consider Selling

The information contained in this report is not represented or warranted to be accurate, correct, complete, or timely. This report is for informational purposes only and should not be considered a solicitation to buy or sell a security. Before acting on any information in this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Assumptions, opinions, and estimates are based on our judgment as of the date of the report and are subject to change without notice. Valuentum is not responsible for any errors or omissions or for results obtained from the use of this report. Redistribution is prohibited without written permission. To license Valuentum research, contact us at [email protected]. Page 14 Glossary

Estimated Fair Value. This measure is our opinion of the fair equity value per share of Investment Style. Valuentum uses its own proprietary stock-classification system. the company. If our forecasts prove accurate, which may not always be the case, we Nano-cap: Less than $50 million; Micro-cap: Between $50 million and $200 million; may expect a firm's stock price to converge to this value within the next 3 years. Small-cap: Between $200 million and $2 billion; Mid-cap: Between $2 billion and $10 billion; Large-cap: Between $10 billion and $200 billion; Mega-cap: Over $200 billion. Blend: Firm's that we think are undervalued and exhibit high growth Fair Value Range. The fair value range represents an upper bound and lower bound, prospects (growth in excess of three times the rate of assumed inflation). Value: between which we would consider the firm to be fairly valued. The range considers our Firm's that we believe are undervalued, but do not exhibit high growth prospects. estimate of the firm's fair value and the margin of safety suggested by the volatility of Growth: Firms that are not undervalued, in our opinion, but exhibit high growth key valuation drivers, including revenue, gross margin, earnings before interest, and prospects. Core: Firms that are neither undervalued nor exhibit high growth enterprise free cash flow (the determinants behind our ValueRisk™ rating). prospects.

DCF Valuation. We opine on the firm's valuation based on our DCF process. Firms Company Vitals. In this section, we list key financial information and the sector and that are trading with an appropriate discount to our fair value estimate receive an industry that Valuentum assigns to the stock. The P/E-Growth (5-yr), or PEG ratio, UNDERVALUED rating. Firms that are trading within our fair value range receive a divides the current share price by last year's earnings (EPS) and then divides that FAIRLY VALUED rating, while firms that are trading above the upper bound of our quotient by our estimate of the firm's 5-year EPS growth rate. The estimated fair value range receive an OVERVALUED rating. normalized diluted EPS and estimated normalized EBITDA represent the five-year forward average of these measures used in our discounted cash flow model. The P/E Relative Value. We compare the firm's forward price-to earnings (PE) ratio and its on estimated normalized EPS divides the current share price by estimated normalized price/earnings-to-growth (PEG) ratio to that of its peers. If both measures fall below the diluted EPS. The EV/estimated normalized EBITDA considers the current enterprise peer median, the firm receives an ATTRACTIVE rating. If both are above the peer value of the company and divides it by estimated normalized EBITDA. EV is defined median, the firm receives an UNATTRACTIVE rating. Any other combination results as the firm's market capitalization plus total debt, minority interest, preferred stock in a NEUTRAL rating. less cash and cash equivalents.

ValueCreation™. This is a proprietary Valuentum measure. ValueCreation™ indicates the firm's historical track record in creating economic value for shareholders, Business Quality Matrix. We compare the firm's ValueCreation™ and ValueRisk™ taking the average difference between ROIC (without goodwill) and the firm's ratings. The box is an easy way for investors to quickly assess the business quality of estimated WACC during the past three years. The firm's performance is measured along a company. Firms that generate economic profits with little operating variability the scale of EXCELLENT, GOOD, POOR, and VERY POOR. Those firms with score near the top right of the matrix. EXCELLENT ratings have a demonstrated track record of creating economic value, while those that register a VERY POOR mark have been destroying economic value. Timeliness Matrix. We compare the company's recent stock performance relative to the market benchmark with our assessment of its valuation. Firms that are experiencing near-term stock price outperformance and are undervalued byour ValueRisk™. This is a proprietary Valuentum measure. ValueRisk™ indicates the estimate may represent timely buys. historical volatility of key valuation drivers, including revenue, gross margin, earnings before interest, and enterprise free cash flow. The standard deviation of each measure is Range of Potential Outcomes. The firm's margin of safety is shown in the graphic calculated and scaled against last year's measure to arrive at a percentage deviation for of a normal distribution. We consider a firm to be undervalued if its stock price falls each item. These percentage deviations are weighted equally to arrive at the along the green line and overvalued if the stock price falls along the red line. We corresponding fair value range for each stock, measured in percentage terms. The firm's consider the firm to be fairly valued if its stock price falls along the yellow line. performance is measured along the scale of LOW, MEDIUM, HIGH, and VERY HIGH. The ValueRisk™ rating for each firm also determines the fundamental beta of each Return on Invested Capital. At Valuentum, we place considerable emphasis on firm along the following scale: LOW (0.85), MEDIUM (1), HIGH (1.15), VERY HIGH return on invested capital (both with and without goodwill). The measure focuses on (1.3). the return (earnings) the company is generating on its operating assets and is superior to return on equity and return on assets, which can be skewed by a firm's leverage or ValueTrend™. This is a proprietary Valuentum measure. ValueTrend™ indicates the excess cash balance, respectively. trajectory of the firm's return on invested capital (ROIC). Firms that earned an ROIC last year that was greater than the 3-year average of the measure earn a POSITIVE Technical Evaluation. We evaluate a firm's near-term and medium-term moving rating. Firms that earned an ROIC last year that was less than the 3-year average of the averages and money flow index (MFI) to assign each firm a rating along the measure earn a NEGATIVE rating. following scale: VERY BULLISH, BULLISH, NEUTRAL, BEARISH, and VERY BEARISH. Cash Flow Generation. Firms' cash flow generation capacity are measured along the scale of STRONG, MEDIUM, and WEAK. A firm with a 3-year historical free cash Stock Price Relative Strength. We assess the perfomance of the company's stock flow margin (free cash flow divided by sales) greater than 5% receives a STRONG during the past quarter, 13 weeks, relative to an ETF that mirrors the aggregate rating, while firms earning less than 1% of sales as free cash flow receive a WEAK performance of constituents of the stock market. Firms are measured along the scale rating. of STRONG, NEUTRAL, and WEAK. Companies that have outperformed the market index by more than 2.5% during this 13-week period receive a STRONG Financial Leverage. Based on the firm's normalized debt-to-EBITDA metric, we rank rating, while firms that trailed the market index by more than 2.5% during this 13- firms on the following scale: LOW, MEDIUM, and HIGH. Companies with a week period receive a WEAK rating. normalized debt-to-EBITDA ratio below 1.5 receive a LOW score, while those with a measure above 3 receive a HIGH score. Money Flow Index (MFI). The MFI is a technical indicator that measures buying Upside/Downside Volume. Heavy volume on up days and lower volume on down days and selling pressure based on both price and volume. Traders typically use this suggests that institutions are heavily participating in a stock's upward advance. We use measure to identify potential reversals with overbought and oversold levels. We use a the trailing 14-week average of upside and downside volume to calculate an 14-week measure to rank firms along the following scale: EXTREMELY informative ratio. We rank each firm's U/D volume ratio along the following scale: OVERBOUGHT (>90), OVERBOUGHT (80-90), NEUTRAL (20-80), OVERSOLD BULLISH, IMPROVING, DETERIORATING, and BEARISH. (10-20), EXTREMELY OVERSOLD (0-10).

To send us feedback or if you have any questions, please contact us at MELI Rating History Price Fair Value VBI [email protected]. We're always looking for ways to better serve your 9-Sep-21 $1,883.41 $1,887.00 6 investment needs and improve our research. 29-Dec-20 $1,673.49 $1,590.00 6 21-Aug-20 $1,202.28 $1,186.00 6 25-Oct-19 $549.81 $555.00 3 23-Sep-19 $545.73 $555.00 3 18-Feb-19 $367.21 $268.00 4 17-Sep-18 $315.08 $262.00 3 14-May-18 $298.58 $240.00 3 12-Jan-18 $342.47 $255.00 4 3-Nov-17 $267.35 $233.00 6 11-Sep-17 $285.26 $230.00 6 1-May-17 $275.16 $187.00 2 6-Jan-17 $172.16 $138.00 6 22-Jul-16 $154.24 $125.00 5

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