rakuten left binance left net_left adver left

Mastercard Stock: A High-Margin, Capital Return Machine

Mastercard (NYSE:MA), along with its peer Visa (NYSE:V), have essentially monopolized the payments processing industry. Over the years, Mastercard has been tapping into the full...
Mastercard Stock: A High-Margin, Capital Return Machine © Reuters. Mastercard Stock: A High-Margin, Capital Return Machine

Mastercard (NYSE:MA), along with its peer Visa (NYSE:V), have essentially monopolized the payments processing industry.

Over the years, Mastercard has been tapping into the full potential payments processing, essentially running the toll booth of daily transitions.

As Warren Buffet's quote goes, "Never invest in a business you cannot understand." Fortunately, Mastercard's business model is quite straightforward, with its operations being relatively frictionless.

Operating as a toll booth on our daily coffee swipes, or Netflix's (NASDAQ:NFLX) automatic subscription payment, Mastercard enjoys a smooth and predictable revenue stream. (See MA stock charts on TipRanks)

Further, due to Mastercard's long-term relationships with banking institutions globally (Visa has also built such relationships), the company features an unparalleled moat.

Investors often think of fintech companies such as Paypal (PYPL) and Square (SQ) as industry competitors, though this is hardly the case. As many useful and innovative features as these companies provide, they still utilize Mastercard's and Visa's very own processing networks.

Over the years, no competitor has managed to even come close to disrupting the payments processing industry. For this reason, Mastercard has produced market-beating returns over the years.

I am bullish on the stock. That being said, Mastercard shares do not come cheap these days.

Financials Strengthening

Mastercard's Q2 results showcased the company's quick rebound from last year's adversely impacted results.

Due to a great number of retail locations being forced to shut down in the midst of the pandemic, Mastercard's processing volumes had declined notably in the comparable period last year. Hence, Mastercard reported year-over-year Q2 revenue growth of 36%, to $4.53 billion. This marks a new quarterly record for the company.

The results were attributed to improvements across the board. Gross dollar volume growth was 33% on a local currency basis, reaching $1.9 trillion, as retail locations started reopening.

Further, cross-border volumes repaired significantly, growing 58% on a local currency basis, as international travel restrictions slightly eased compared to last year.

Going back to the aforementioned frictionless business model, Mastercard's gross margins remained, as always, at 100%. Think of Mastercard's revenues as "royalties" received for each payment processed, with essentially no cost of sales.

For this reason, net margins also remained sky-high, at 45.6%. Essentially, Mastercard's business model is so scalable that it should come as no surprise if net margins end up crossing the 50% threshold, as the company matures further, and global transaction volumes continue to increase.

Capital Returns & Valuation

Due to Mastercard's historically fat bottom line, management has been able to richly reward its shareholders through both dividends and stock buybacks.

The company has raised its dividend annually for 10 years now, with its latest DPS hike remaining in the double-digit range, at 10%.

Stock repurchases also remain aggressive. During the last four quarters, Mastercard has repurchased $6.29 billion of its stock. Since this has been the primary method for Mastercard to return cash to shareholders, the company has impressively bought back and retired around 27% of its outstanding stock since 2007.

That being said, Mastercard's quality financials and growing capital returns do not come cheap. The stock is currently trading with a forward P/E of 32.7, which is notably higher than its historical average.

Investors should not expect any meaningful valuation compression, nonetheless.

Wall Street’s Take

Turning to Wall Street, Mastercard has a Strong Buy consensus rating, based on 14 Buys, one Hold, and zero Sells assigned in the past three months. At $441.27, the average MA price target implies 26.8% upside.

Disclosure: At the time of publication, Nikolaos Sismanis did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.

ig right nyse right Neteller adver right
APPROVED BROKERS
Row 1 Left net_home_top Row 1 Right Row 2 Left Row 2 Center Row 2 Right Main Right TOP 07 Main Right TOP 06 Main Right TOP 05 Main Right TOP 04 Main Right TOP 03 Main Right TOP 01
28-09-2021 05:59:13 (UTC+7)

EUR/USD

1.1695

+0.0001 (+0.01%)

Summary

↑ Sell

Moving Avg:

Buy (1)

Sell (11)

Indicators:

Buy (0)

Sell (10)

EUR/USD

1.1695

+0.0001 (+0.01%)

Summary

↑ Sell

Moving Avg:

Buy (1)

Sell (11)

Indicators:

Buy (0)

Sell (10)

GBP/USD

1.3701

+0.0006 (+0.04%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (2)

Sell (7)

USD/JPY

111.00

-0.01 (-0.00%)

Summary

↑ Buy

Moving Avg:

Buy (7)

Sell (5)

Indicators:

Buy (11)

Sell (0)

AUD/USD

0.7287

+0.0001 (+0.01%)

Summary

Sell

Moving Avg:

Buy (4)

Sell (8)

Indicators:

Buy (0)

Sell (5)

USD/CAD

1.2624

-0.0003 (-0.02%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (2)

Sell (4)

EUR/JPY

129.82

+0.04 (+0.03%)

Summary

↑ Buy

Moving Avg:

Buy (10)

Sell (2)

Indicators:

Buy (6)

Sell (1)

EUR/CHF

1.0827

+0.0004 (+0.04%)

Summary

Sell

Moving Avg:

Buy (2)

Sell (10)

Indicators:

Buy (3)

Sell (3)

Gold Futures

1,751.25

+1.40 (+0.08%)

Summary

↑ Buy

Moving Avg:

Buy (10)

Sell (2)

Indicators:

Buy (8)

Sell (0)

Silver Futures

22.645

+0.008 (+0.04%)

Summary

↑ Buy

Moving Avg:

Buy (10)

Sell (2)

Indicators:

Buy (8)

Sell (0)

Copper Futures

4.2778

-0.0019 (-0.04%)

Summary

Neutral

Moving Avg:

Buy (4)

Sell (8)

Indicators:

Buy (2)

Sell (2)

Crude Oil WTI Futures

75.34

-0.07 (-0.09%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (0)

Sell (7)

Brent Oil Futures

78.62

+0.01 (+0.01%)

Summary

↑ Buy

Moving Avg:

Buy (10)

Sell (2)

Indicators:

Buy (4)

Sell (1)

Natural Gas Futures

5.913

+0.053 (+0.90%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (8)

Sell (1)

US Coffee C Futures

194.98

+0.63 (+0.32%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (5)

Sell (0)

Euro Stoxx 50

4,165.48

+6.97 (+0.17%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (0)

Sell (9)

S&P 500

4,443.11

-12.37 (-0.28%)

Summary

↑ Sell

Moving Avg:

Buy (3)

Sell (9)

Indicators:

Buy (0)

Sell (9)

DAX

15,573.88

+42.13 (+0.27%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (0)

Sell (8)

FTSE 100

7,063.40

+11.92 (+0.17%)

Summary

↑ Sell

Moving Avg:

Buy (1)

Sell (11)

Indicators:

Buy (1)

Sell (7)

Hang Seng

24,208.78

+16.62 (+0.07%)

Summary

↑ Buy

Moving Avg:

Buy (10)

Sell (2)

Indicators:

Buy (8)

Sell (0)

US Small Cap 2000

2,281.79

+33.71 (+1.50%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (0)

Sell (7)

IBEX 35

9,002.90

+129.80 (+1.46%)

Summary

Buy

Moving Avg:

Buy (7)

Sell (5)

Indicators:

Buy (4)

Sell (2)

BASF SE NA O.N.

64.740

+1.040 (+1.63%)

Summary

↑ Sell

Moving Avg:

Buy (1)

Sell (11)

Indicators:

Buy (1)

Sell (5)

Bayer AG NA

47.47

+0.99 (+2.13%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (9)

Sell (0)

Allianz SE VNA O.N.

196.19

+3.85 (+2.00%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (6)

Sell (2)

Adidas AG

278.80

-2.77 (-0.98%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (0)

Sell (10)

Deutsche Lufthansa AG

6.561

+0.328 (+5.26%)

Summary

↑ Buy

Moving Avg:

Buy (11)

Sell (1)

Indicators:

Buy (7)

Sell (2)

Siemens AG Class N

147.27

-0.84 (-0.57%)

Summary

↑ Sell

Moving Avg:

Buy (1)

Sell (11)

Indicators:

Buy (0)

Sell (10)

Deutsche Bank AG

11.120

+0.285 (+2.63%)

Summary

↑ Buy

Moving Avg:

Buy (10)

Sell (2)

Indicators:

Buy (5)

Sell (3)

 EUR/USD1.1695↑ Sell
 GBP/USD1.3701↑ Sell
 USD/JPY111.00↑ Buy
 AUD/USD0.7287Sell
 USD/CAD1.2624↑ Sell
 EUR/JPY129.82↑ Buy
 EUR/CHF1.0827Sell
 Gold1,751.25↑ Buy
 Silver22.645↑ Buy
 Copper4.2778Neutral
 Crude Oil WTI75.34↑ Sell
 Brent Oil78.62↑ Buy
 Natural Gas5.913↑ Buy
 US Coffee C194.98↑ Buy
 Euro Stoxx 504,165.48↑ Sell
 S&P 5004,443.11↑ Sell
 DAX15,573.88↑ Sell
 FTSE 1007,063.40↑ Sell
 Hang Seng24,208.78↑ Buy
 Small Cap 20002,281.79↑ Sell
 IBEX 359,002.90Buy
 BASF64.740↑ Sell
 Bayer47.47↑ Buy
 Allianz196.19↑ Buy
 Adidas278.80↑ Sell
 Lufthansa6.561↑ Buy
 Siemens AG147.27↑ Sell
 Deutsche Bank AG11.120↑ Buy
Mua/Bán 1 chỉ SJC
# So hôm qua # Chênh TG
SJC Eximbank5,665/ 5,715
(0/ 0) # 900
SJC HCM5,635/ 5,700
(0/ 0) # 885
SJC Hanoi5,635/ 5,702
(0/ 0) # 887
SJC Danang5,635/ 5,702
(0/ 0) # 887
SJC Nhatrang5,635/ 5,702
(0/ 0) # 887
SJC Cantho5,635/ 5,702
(0/ 0) # 887
Cập nhật 28-09-2021 05:59:14
Xem lịch sử giá vàng SJC: nhấn đây!
ↀ Giá vàng thế giới
$1,751.23+1.740.10%
Live 24 hour Gold Chart
ʘ Giá bán lẻ xăng dầu
Sản phẩmVùng 1Vùng 2
RON 95-IV2204022480
RON 95-II,III2194022370
E5 RON 92-II2071021120
DO 0.05S1658016910
DO 0,001S-V1693017260
Dầu hỏa1564015950
ↂ Giá dầu thô thế giới
WTI$75.34+0.350.47%
Brent$79.40+0.460.57%
$ Tỷ giá Vietcombank
Ngoại tệMua vàoBán ra
USD22.630,0022.860,00
EUR25.993,7727.346,60
GBP30.324,2231.591,18
JPY200,45212,05
KRW16,7520,39
Cập nhật lúc 18:54:42 27/09/2021
Xem bảng tỷ giá hối đoái
binance main right Fxpro aetos main right adver main right