Investors seeking growth in emerging markets may find exceptional opportunities in undervalued stocks that Wall Street has yet to discover fully. Recent analysis highlights significant growth potential in this segment. Emerging economies are expected to outpace with a projected growth rate of over 4% this year, compared to just 2% for developed markets. This backdrop forms the list of the top undiscovered emerging market stocks for investors.
Furthermore, experts anticipate that emerging markets could notably benefit from a possible peak in U.S. interest rates and a rebound in earnings growth. These markets are also expected to gain from improving economic conditions in major economies like China.
Investors are particularly eyeing Brazil and India, both poised for considerable economic activities. Brazil’s potential rate cuts by central banks could reinvigorate its economy, making it a hotspot for investment. Meanwhile, India continues to attract foreign investments, bolstered by a young population and rising consumer spending.
So here are three of the best undiscovered emerging market stocks for investors to add to their portfolios.
MercadoLibre (MELI)
MercadoLibre (NASDAQ:MELI) is a leading e-commerce and digital payments company in Latin America. The company operates an online marketplace and provides financial technology solutions.
In Q1 2024, MercadoLibre reported strong financial results, with earnings per share (EPS) of $6.78, surpassing the analyst estimate of $6.03. The company’s revenue for the quarter was $4.33 billion, 12.55% higher than the expected $3.85 billion. This revenue represented a 36% increase year-over-year. Growth across its e-commerce and fintech segments, reflecting its continued expansion and market penetration in Latin America, drove this robust performance.
The company’s fintech arm, MercadoPago, has seen significant growth and contributes substantially to overall revenue. MercadoPago facilitates online payments and is increasingly used for in-person transactions.
MercadoLibre is well-positioned to capitalize on the growing e-commerce and digital payments markets in Latin America. The company plans to continue investing in technology and infrastructure to support its expanding operations.
Sea Limited (SE)
Sea Limited (NYSE:SE) is a leading global consumer internet company headquartered in Singapore. It operates in three core sectors: digital entertainment, e-commerce and digital financial services.
In Q1 2024, Sea Limited reported revenue of $3.73 billion, marking a 22.7% year-over-year increase. Despite this revenue growth, the company reported an EPS of $0.21, which missed some analysts’ estimates by 41.7% and was 65.6% lower than Q1 2023’s EPS of $0.61. The adjusted EBITDA for the quarter was $401.1 million, down 20.9% from Q1 2023’s $507.2 million.
Sea Limited’s strong performance was driven by its core businesses. The e-commerce segment, led by Shopee, showed significant improvement with reduced losses and is nearing profitability. Garena, the digital entertainment arm, performs well in the gaming sector.
Looking ahead, Sea Limited is focused on sustaining its growth by leveraging its established platforms and expanding its market presence.
StoneCo (STNE)
StoneCo (NASDAQ:STNE) is a prominent financial technology company based in Brazil. It is known for its comprehensive suite of financial services and software solutions for small and medium-sized enterprises (SMEs).
In Q1 2024, StoneCo reported earnings per share of $0.29, slightly surpassing the analyst estimate of $0.28. The company’s revenue for the quarter was $623.22 million real, which was 3.64% higher than the anticipated $601.32 million real. Significant growth across its core business segments drove this robust performance.
StoneCo has seen substantial growth in its Total Payment Volume (TPV), which increased by 24% year-over-year. The credit solution portfolio grew to $532 million real, aligning with StoneCo’s growth strategy.
The software segment of StoneCo also contributed positively, with vertical software revenue increasing by 12% year over year. Overall, the company’s adjusted EBITDA rose by 75%.
This makes STNE one of the top emerging market stocks that could deliver strong results for investors moving forward.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.