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Mastercard Beats Analyst Estimates for 2Q17, Net Income Rose 20%

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Part 6
Mastercard Beats Analyst Estimates for 2Q17, Net Income Rose 20% PART 6 OF 6

Why Mastercard Has Premium Valuations

Price-to-book ratio

Mastercard (MA) posted operating income of $1.7 billion in 2Q17, which reflects a substantial rise of 20% from its 2Q16 operating income. The company has a price-to-book ratio of ~24.5x, which is higher than its peers, on the back of adjusted growth of 9% in its gross dollar volumes on a year-over-year (or YoY) basis. 

Mastercard’s total operating expenses in 2Q17 totaled $1.4 billion. On a currency-neutral basis, the company has witnessed a 17% rise YoY in its general and administrative expenses. Mastercard posted an increase of 17% YoY in its advertising and marketing expenses on a currency-neutral basis.

Why Mastercard Has Premium Valuations

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Mastercard (MA) currently has a price-to-cash-flow ratio of 31.6x. Its peers have the following price-to-cash-flow ratios:

  • Visa (V): 26.9x
  • Discover Financial Services (DFS): 5.6x
  • American Express (AXP): 8.3x

Price-to-sales ratios

Mastercard (MA) has a price-to-sales ratio of 12.0x on a trailing-12-month (or TTM) basis. The price-to-sales ratio of its major competitors in the consumer financial (XLF) space on a TTM basis are as follows:

  • Visa (V): ~12.8x
  • Discover Financial Services (DFS): ~3.2x
  • American Express (AXP): ~2.5x
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