MasterCard is Growing in the Single Digits

Stock (Symbol)

MasterCard (MA)

Stock Price


Data is as of
January 9, 2016
Expected to Report
Jan 29
Company Description
mastercard_brandMA is a technology company in the global payments industry. MA connects consumers, financial institutions, merchants, Governments and businesses around the world, enabling them to use electronic forms of payment instead of cash and checks. MA brands include MasterCard, Maestro and Cirrus. It provides offerings, such as loyalty and reward programs, information services and consulting. The Company focuses on segments, including Government programs, such as Social Security payments, unemployment benefits; commercial programs, such as payroll, health savings accounts, employee benefits and others, and consumer reloadable programs for individuals without formal banking relationships and non-traditional users of electronic payments. MA provides a variety of products and solutions that support payment products that customers can offer to their cardholders. Source: Thomson Financial
Sharek’s Take
David SharekMasterCard is holding up well as the stock market is in a fierce selloff. The downside of that is the stock’s not on sale at this time, and I would like it to fall further before buy in. The strong dollar is hurting results. Sales rose just 1% last qtr, adjusted for currency growth would have been 8%. MasterCard also has to give out rebates and incentives to get new business, and these usually occur in the early qtrs of the deal, and thus hurt profits. Profit growth the last 2 qtrs was 6% and 5%, with the next 2 qtrs estimated to be just 3% and 6%. Additionally, profit estimates have declined each qtr during the last year (2016’s from $4.19 to $3.88) thus the stock doesn’t have momentum. MasterCard is a relatively safe stock with an estimated 16% long-term growth rate but right now profits are growing around 5% a qtr (with estimates declining) and I don’t see the stock surging higher with a P/E of 23, so I’ll keep it on my radar for now. The company has a $4 billion share buyback program in place, which would be 4% of its shares, and pays a 1% dividend to investors.
One Year Chart
MA_2015_Q4Profit growth was just 5% last qtr on a 1% increase in sales. I mentioned MA was lowering estimates. Next qtr’s est just fell from 12% to 3% and was 22% a couple qtrs before that. MA is a quality company, and deserves a P/E higher than its growth rate.
Fair Value
MA_2015_Q4_PHIn the past management has stated it will hit 20% earnings growth long-term. Lately the strong dollar has put those plans on hold. Still, the company has grown 15% to 20% on a regular basis — without a down year — thus I feel MA is worth 25x earnings. Right now the stock seems slightly undervalued, and has great upside to my 2017 Fair Value, but annual profit estimates have declined 4 straight qtrs and I feel that trend will continue, thus my Fair Values could follow suit.
Bottom Line
MA_2015_Q4_10yrMasterCard is a core stock holding for investors who desire growth with good degree of safety. It has an estimated long term growth rate of 16%, pays a 1% dividend, and MA has grown steadily since it went public — with profits up every year. But right now profit growth is in the mid-single digits there are better values in a stock market that’s in a fierce decline. I would like to see a better price on MA before buying in. 
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