Mastercard has been treading water for the past six months, holding steady at $570.97. The stock also fell short of the S&P 500’s 14.4% gain during that period.
Is now the time to buy MA? Find out in our full research report, it’s free for active Edge members.
Why Is MA a Good Business?
Recognizable by its iconic "Priceless" advertising campaign that has run in over 120 countries, Mastercard (NYSE: MA) operates a global payments network that connects consumers, financial institutions, merchants, and businesses, enabling electronic transactions and providing payment solutions.
1. Skyrocketing Revenue Shows Strong Momentum
A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.
Luckily, Mastercard’s revenue grew at an impressive 15.1% compounded annual growth rate over the last five years. Its growth surpassed the average financials company and shows its offerings resonate with customers.
2. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Mastercard’s EPS grew at a remarkable 19% compounded annual growth rate over the last five years, higher than its 15.1% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
3. Stellar ROE Showcases Lucrative Growth Opportunities
Return on equity (ROE) reveals the profit generated per dollar of shareholder equity, which represents a key source of bank funding. Banks maintaining elevated ROE levels tend to accelerate wealth creation for shareholders via earnings retention, buybacks, and distributions.
Over the last five years, Mastercard has averaged an ROE of 164%, exceptional for a company operating in a sector where the average shakes out around 10% and those putting up 25%+ are greatly admired. This shows Mastercard has a strong competitive moat.
Final Judgment
These are just a few reasons why Mastercard ranks near the top of our list. With its shares underperforming the market lately, the stock trades at 30.6× forward P/E (or $570.97 per share). Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free for active Edge members .
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