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Doing it Well

Stock (Symbol) Stock Price

MasterCard (MA)

$520

Data is as of Expected to Report Sector

February 11, 2013

Apr 26

Financial

Sharek’s Take
David SharekI haven’t been so high on MasterCard since 2012 Q1 when I said MasterCard stock is touching $400, should be $500 later in the year, and $600 next year. So far, that prediction has come true, but the past couple of quarters I’ve felt MA didn’t’ have much upside, then the stock would move higher. Now I’m re-thinging my thesis on MA and am taking its Fair Value P/E higher. MasterCard has a great business that I’m starting to respect more. The company can grow sales at 10% and that little growth leads to 20% profit growth. Additionally, management keeps pushing out its 20% annual profit growth forecast. Now its 2013-2015. 20% profit growth through 2015 for 20 times earnings, that’s what MA is now.
One-Year Chart
MA_2013_Q1This stock keeps going higher even though profit growth wasn’t 20% for a couple of quarters last year. Truth be told, I was selling the stock, thinking it was high. Now I see the stock should be even higher. Early 2013 will be a slower period for the company, and growth should accelerate later in the year.
Earnings Table
MA_2013_Q1_EPSLast quarter, revenue growth was 10%, up from 5% the quarter earlier (and revenue growth had been slowing). Profit growth still clocked in at 21%
 
MA only beat by 5 cents, after whipping estimates by 26 cents 2QtrsAgo.
 
Annual Profit Estimates are fairly consistent to last quarter.

Quarterly estimates show teens profot growth ahead, with estimates declining, but that hasn’t hurt the stock price. We have to sit through two or three slower quarters starting now.
Fair Value
MA_2013_Q1_FVI’m taking my Fair Value P/E up from 21 to 25. MA has solid upside for a conservative stock.
Ten-Year Chart
MA_2013_Q1_10yrThis ten-year chart looks great but profit growth slowed to 18% last year and is expected to be 16% this year. Investors don’t mind becuase MA says growth will accelerate when Europe gets it together.
Power Ranking Bottom Line
Growth Portfolio

9 of 15

Although MasterCard is going to have slower growth in the beginning of 2013, the “20% long-term” claim carries more weight and keeps MA timely. This is a safe stock that has upside of 23% to Fair Value this year and also long-term buy-and-hold appeal.
 
I’m moving MA up in the Growth Portfolio Power Rankings from the current 13 to 9. I like the stock for the the Aggressive Growth Portfolio, but would prefer to buy it on a dip.
Aggressive Growth Portfolio

N/A

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