Coupang vs. MercadoLibre: E-Commerce Titans Clash
Who Will Win The Quality Quick Scan of These Two Giants?
Welcome to Compound & Fire, where we’re on a mission to build wealth the smart way—hunting for top-quality businesses that grow shareholder value over the long haul, paving the road to financial freedom and early retirement.
This community is free, but if you’re enjoying the deep dives and want to support more content, you can treat me to a coffee on Buy Me a Coffee. Every bit helps keep the fire burning, and I’m truly grateful for your support! Let’s grow this journey together—join the conversation on our Global Quality Investing Discord App and subscribe to my Substack for free if you haven’t yet!
Hello, fellow quality investors!
The e-commerce landscape is a battleground where giants vie for dominance, leveraging scale, logistics, and innovation to capture market share. Today, I pit two heavyweights against each other: Coupang (CPNG), South Korea’s leading e-commerce platform, and MercadoLibre (MELI), the Latin American e-commerce and fintech powerhouse.
Both companies have built formidable businesses, but which one is the better investment for quality-focused investors? Let’s dive into their financials, operational efficiency, and shareholder alignment using our Quick Scan Investment Readiness Scores to find out.
Quick Scan Overview: Investment Readiness Scores
My Quick Scan evaluates companies across three key pillars: Company Snapshot, Financial Health & Performance, and Shareholder Value & Suitability. Each metric is scored out of 100, contributing to an Investment Readiness Score (IRS). A score above 80% flags a company as a candidate for in-depth quality investing analysis by Compound & Fire.
Coupang: Just Crossing the Threshold
Coupang, often dubbed the "Amazon of South Korea," has made waves with its lightning-fast delivery and expansive product offerings. Its Quick Scan reveals:
Investment Readiness Score: 80.9% (just above the 80% threshold)
Balance Sheet Health: Net Debt/EBITDA at -1.9x, indicating a strong net cash position.
Growth: Revenue 10-Year CAGR of 38.5%, reflecting explosive growth.
Profitability: Gross margin at 29.2%, net margin at 0.5%—relatively low for a mature e-commerce player.
ROIC: 14%, just below the 15% quality threshold, indicating moderate capital efficiency
This Quick Scan is shared and available in our Discord app
MercadoLibre: A Clear Winner
MercadoLibre dominates Latin America’s e-commerce and fintech space, offering a mix of online retail, marketplace services, digital payments, and logistics. Its Quick Scan tells a stronger story:
Investment Readiness Score: 88.2% (comfortably above the 80% threshold)
Balance Sheet Health: Net Debt/EBITDA at -0.1x, also a net cash position.
Profitability: Gross margin at 52.7%, net margin at 9.2%—significantly higher than Coupang.
ROIC: 20.5%, well above the 15% quality threshold, reflecting superior capital efficiency.
Growth: Revenue 10-Year CAGR of 46.8%, outpacing Coupang.
MercadoLibre’s IRS of 88.2% positions it as a standout, with strong profitability, growth, and capital allocation metrics.
Key Differences: Where MercadoLibre Pulls Ahead
Imagine two e-commerce giants racing to build empires in their respective regions. Coupang, based in South Korea, has been sprinting forward with incredible speed, revolutionizing delivery with its Rocket Delivery service that promises goods at your doorstep in hours. Its revenue growth has been nothing short of explosive, compounding at nearly 39% annually over the past decade as it captures the highly competitive South Korean market. But as Coupang races forward, it’s burning fuel at a rapid pace. Its margins tell a story of heavy investment—keeping only 29 cents of every dollar in revenue as gross profit, and a mere half a cent as net profit after all expenses. The company has poured capital into its logistics network and the recent Farfetch acquisition, which has weighed on its ability to generate returns.
Now picture MercadoLibre, charging through Latin America with a broader, more diversified strategy. It’s not just an e-commerce player—it’s a fintech and logistics powerhouse, with Mercado Pago driving digital payments across the region. MercadoLibre’s revenue growth outpaces Coupang, compounding at nearly 47% annually over the past decade, thanks to the untapped potential of Latin America’s fragmented markets. But what sets MercadoLibre apart is how it runs its race. For every dollar of revenue, it keeps 53 cents as gross profit and converts 9 cents into net profit—a stark contrast to Coupang’s razor-thin margins. This efficiency translates into how it uses its capital: MercadoLibre generates over 20 cents in operating profit for every dollar invested, a testament to its ability to balance growth with profitability. Both companies carry no significant goodwill on their balance sheets, a sign of organic growth, and both sit in a net cash position, giving them flexibility. But MercadoLibre’s superior efficiency and profitability make it the faster, more sustainable runner in this race at the moment given the high-level information.
Shareholder Value & Suitability: A Close Call
When it comes to aligning with shareholders, both Coupang and MercadoLibre show a commitment to creating long-term value, though MercadoLibre edges out slightly in overall impact. Coupang keeps stock-based compensation low at 1.4% of revenue, ensuring minimal dilution from equity awards, and has only increased its outstanding shares by 0.9% since its IPO—a strong sign of discipline. Management owns 8.9% of the company, aligning their interests with shareholders. MercadoLibre is similarly disciplined, with stock-based compensation at 1.3% of revenue, but its outstanding shares have grown by 1.6% over the past decade, a slightly less favorable figure. Management ownership at MercadoLibre stands at 7.3%, still respectable but a touch lower than Coupang’s. While Coupang scores better on share dilution, MercadoLibre’s stronger financial performance—higher profitability and better capital efficiency—means it’s creating more value for shareholders over the long term, giving it a slight edge in this category.
The Verdict: MercadoLibre Wins
After a thorough comparison, MercadoLibre emerges as the victor in this e-commerce showdown. Its Investment Readiness Score of 88.2% comfortably surpasses Coupang’s 80.9%, reflecting a business that’s firing on all cylinders. MercadoLibre’s ability to generate higher profits from every dollar of revenue, coupled with its efficient use of capital, makes it a standout. It’s growing faster than Coupang, capitalizing on Latin America’s vast potential, and its diversified model—spanning e-commerce, fintech, and logistics—gives it a more sustainable edge. Coupang, while impressive with its rapid growth and strong balance sheet, is still in a heavy investment phase, as seen in its lower profitability and the pressures from the Farfetch acquisition. For quality investors seeking a business that balances growth with efficiency and long-term value creation, MercadoLibre is the clear choice.
What’s Next?
It’s important to note that this comparison is based on our Quick Scan, a high-level assessment designed to identify quality investment candidates. MercadoLibre has won this initial battle, securing a higher Investment Readiness Score and showcasing superior profitability and capital efficiency. However, the fight is far from over. To truly determine the best long-term investment between these two e-commerce titans, a deeper dive is essential. Coupang’s lower margins, for instance, may be a temporary trade-off as the company invests heavily in its future—building out logistics, expanding its ecosystem, and integrating the Farfetch acquisition. If these investments pay off, Coupang could close the gap with MercadoLibre over time.
Adding intrigue to the story, legendary investor Stanley Druckenmiller has been a long-time believer in Coupang, holding a position since 2021 and adding to his stake last quarter, increasing his shares by 4.5% (+400.000 shares) in Q1 2025, signaling continued confidence in the company’s long-term potential.
We’ll be keeping a close eye on both companies, diving deeper into their strategies and financials in future analyses on Substack and our global quality investing app on Discord!
Which e-commerce giant would you bet on? Let me know in the comments!
If you’re enjoying these Quick Scans, consider subscribing to Compound & Fire for more quality investing insights:
And feel free to share this article with friends:
Disclaimer
The information in this article is provided for informational and educational purposes only.
The information is not intended to be and does not constitute financial advice or any other advice, is general in nature, and is not specific to you. Before using this article’s information to make an investment decision, you should seek the advice of a qualified and registered securities professional and undertake your own due diligence.
None of the information in this article is intended as investment advice, as an offer or solicitation of an offer to buy or sell, or as a recommendation, endorsement, or sponsorship of any security, company, or fund. The author is not responsible for any investment decision made by you. You are responsible for your own investment research and investment decisions.
You should also keep in mind that MELI has better market penetration opportunities because it focuses on Latin America, which is almost 10x the population of South Korea.
A completely emerging market with many needs.