– By GF value
According to GuruFocus Value calculations, Mastercard (NYSE: MA, 30-year financial statements) is considered slightly overvalued. GuruFocus Value is GuruFocus’s estimate of the fair value at which the stock should be traded. It is calculated based on historical multiples at which the stock has traded, past business growth rates, and analysts’ estimates of future business performance. If the share price is significantly above the GF value line, it is overvalued and its future performance is likely to be low. On the other hand, if it is significantly below the GF value line, its future yield is likely to be higher. With a current price of $ 363.78 per share and a market cap of $ 360.5 billion, Mastercard shares are considered slightly overvalued. The GF value for Mastercard is shown in the table below.
Since Mastercard is relatively overvalued, the long-term return on its stock is likely to be lower than its business growth, which averaged 9.3% over the past three years and is estimated to grow 11.84% annually over the next three years. five years.
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Since investing in companies with low financial strength can lead to irreversible loss of capital, investors should carefully study the financial strength of the company before deciding to buy shares. An analysis of the cash-to-debt ratio and interest coverage can provide a good initial idea of a company’s financial soundness. Mastercard has a cash-to-debt ratio of 0.56, which is in line with the average in the lending industry. Based on this, GuruFocus rates Mastercard’s financial soundness at 5 out of 10, which indicates a fair balance. These are Mastercard’s debt and cash over the past years:
Companies that have consistently made profits over a long period of time carry less risk for investors who may want to buy stocks. A higher rate of return usually dictates a better investment than a company with a lower rate of return. Mastercard has been profitable 10 over the past 10 years. In the past twelve months, the company had revenues of $ 15.4 billion and earnings of $ 6.53 per share. Its operating margin is 53.10%, better than 80% of the lending industry. Overall, Mastercard’s profitability is in 10th place out of 10, which indicates high profitability. These are the revenue and net profit of Mastercard in recent years:
One of the most important factors in evaluating a company is growth. Long-term stock returns are closely related to growth, according to research by GuruFocus. Companies that grow faster create more shareholder value, especially if the growth is profitable. Mastercard has an average annual revenue growth of 9.3%, which is in line with the average for the lending industry. The average EBITDA growth over 3 years is 9.3%, which is in line with the average level among companies in the credit services industry.
Another way to gauge a company’s profitability is to compare its return on invested capital (ROIC) with a weighted cost of capital (WACC). Return on Investment (ROIC) measures how well a company is generating cash flow compared to the capital it has invested in its business. The Weighted Average Cost of Capital (WACC) is the rate that a company is expected to pay on average to all securities holders to fund its assets. If the ROIC is higher than the WACC, it means the company is creating value for its shareholders. Over the past 12 months, ROIC Mastercard was 38.99 and WACC was 8.89. The historical comparison of ROIC and WACC for Mastercard is shown below:
In short, Mastercard stock (NYSE: MA, 30-year financial statements) is considered slightly overvalued. The financial condition of the company is satisfactory and profitability is high. Its growth is in the middle range of companies in the credit services industry. To learn more about Mastercard promotions, you can view its 30-year financial statements here.
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This article originally appeared on GuruFocus.