MasterCard, Inc. (MA) Hits All-Time High

Mastercard, Inc. (MA) has been on a tear for the last 18 months, more than doubling in price after climbing from below $200 in September of 2010 to a new all-time high of $443.80. With earnings projected to jump 18% this year and shares trading in line with historical valuations, MA is a way to play the trend in electronic financial transactions.

Growth

MA’s big gains have been built on consistent earnings growth, up 35% annually over the last 5 years. Although that kind of torrid earnings growth might not be sustainable over the long run, it’s not expected to fall off a cliff either. Analysts are looking for 18% earnings growth next year and 16% growth over the next three to five.

Valuation

That strong earnings momentum has kept MA’s valuation in check. Shares are currently trading with a forward P/E of 20X, in line with the 5-year median of 19X. The low print from that same period is 13.5X, with the high of 38X, so shares also trade toward the lower end of the historical range. The lower valuation makes sense in light of slower earnings growth, but this is no “glamor stock” with a weak earnings profile.

Big Picture

Bigger picture, MasterCard is a leading global brand in the growth industry of electronic financial transactions. The company has a strong balance sheet and high margins. With earnings on the upswing and the valuation picture in check, MA is an opportunity to play the long-term trend in electronic financial transactions.

2-Year Chart

Author:

Michael Vodicka is the president and founder of the Vodicka Group, Inc., a Registered Investment  Advisor  (RIA). He specialized in trading fixed-income derivatives at the Chicago Board of  Trade before  spending five years managing equity portfolios for a private investment research company.

Michael graduated from the University of Kansas with a degree in business communications and is registered with the State of Illinois and the SEC (Securities and Exchange Commission) as a Licensed Investment Advisor (Series 65).

ABOUT THE AUTHOR

Michael Vodicka

Michael Vodicka is the president and founder of the Vodicka Group Inc., a licensed investment advisor (Series 65) and a financial journalist.