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Growth is Slipping

Stock (Symbol) Stock Price

MasterCard (MA)

$77

Data is as of Expected to Report Sector

February 02, 2014

Apr 28 – May 02

Financial

Sharek’s Take
David SharekMasterCard stock is up around 50% during the last year and I think MA made its 2014 gains during 2013. I don’t see MA gaining much until the 4th quarter of 2014, when analysts and investors start valuing the company on what it will make in 2015. MA should grow profits in the teens the next few qtrs and is Fairly Valued here at 25 times profits. The company also missed estimates by a little bit last quarter and lowered future estimates. These two factors take away MA’s timeliness. I don’t see the stock going higher right now. Still, this is a great franchise to grow for the long-term as management has boldly stated (and proven) it can grow profits 20% a year long-term.
One-Year Chart
MA_2014_Q1MasterCard is considered to be a 20% grower in my book, but since there’s a high degree of certainty and consistency in the shares I feel MA is worth 25 times profits, which is what it sells for now. Note profit growth was 18% and 16% the last two quarters and is expected to slow a little going forward (Estimates). MA split ten-for-one last quarter.
Earnings Table
MA_2014_Q1_EPSSales growth fell to 12% last quarter, down from 16% 2QtrsAgo. Profit growth also slowed, to 16% from 18%.

MasterCard missed estimates by 3 cents last quarter. This took away MA’s momentum as it had beaten by more than a dollar during the last two quarters combined.

Annual Profit Estimates
fell a little bit. I see 2014’s estimate has only increased a nickel during the last year, that’s not a characteristic of a top stock.

Quarterly estimates show low-teens profit growth coming, and since MA didn’t beat estimates last quarter these low-growth numbers may become reality.
Fair Value
MA_2014_Q1_PHMasterCard is fairly valued here at 25 times earnings. I really feel the stock will sit here a while, possibly until the 4th qtr. There’s decent upside to 2015.
Ten-Year Chart
MA_2014_Q1_10yrIf you take a ruler and place it on the chart line from March 2009-March 2012, you can see MA has moved above this trend the last couple of years. It’s kinda made a parabolic move. The stock’s gotten ahead of itself. This has also happened during a time where the annual profit growth rate has slowed. I think MA will come back to this long-term trendline (see ruler).
Power Ranking Bottom Line
Growth Portfolio

20 of 27

MasterCard is a great company to buy-and-hold but the stock’s gotten ahead of itself and will likely take a breather here. I might sell 1/3 to 1/2 my position in client accounts to free up cash for other stocks.

Right now MA is ranked 20th of 27 stocks in my Growth Portfolio Power Rankings. It’s where you can find other stocks I love for the long-term that don’t have much upside here. MA isn’t an option the Aggressive Growth Portfolio now.
Aggressive Growth Portfolio

N/A

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