Skip to Content
Stock Analyst Update

Effervescent Growth for Mastercard

The wide-moat firm's high growth and minimal reinvestment are alluring, but shares are rich.


Wide-moat  Mastercard (MA) reported a 49% year-over-year increase in earnings per share, helped by a lower corporate tax rate, though operating expense growth actually outpaced a 31% increase in revenue (including the effects of acquisitions and changes in accounting rules) as the company continued to aggressively invest. Adjusted revenue growth, excluding these items, was 20%. We don’t plan to significantly change our fair value estimate. Mastercard generated just over $1 billion in cash flow from operations, returning $1.6 billion in cash to shareholders in the form of dividends and repurchases. We believe Mastercard’s combination of high growth and minimal reinvestment needs makes it one of the most attractive financial services companies we cover but believe its prospects are currently priced into the company’s stock.

Growth continued globally, with gross dollar volumes expanding by double-digit rates in all markets, helped a bit by currency movements. Debit volume expanded faster than credit volumes. Profitable cross-border volume, which expanded at 21%, was a major contributor to revenue growth. Despite increasing competition at the margin in various local markets, we think Mastercard’s ubiquitious international presence will be very difficult to replicate. Furthermore, the rise of e-commerce should enable even more spending across international borders, benefiting the firm.

Operating margin fell slightly, and we continue to believe that investments will continue at a healthy rate as the firm targets newer markets (B2B, for example) and payment technology advances at a rapid rate. We thus think margin expansion will be somewhat limited in the near term.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

Jim Sinegal does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.