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Mastercard's Performance in 1H17: Why It's Doing So Well

PART:
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Part 5
Mastercard's Performance in 1H17: Why It's Doing So Well PART 5 OF 7

What Led to Mastercard’s Premium Valuations?

Strong valuations

Mastercard (MA) currently has a one-year price estimate of $145 per share, which represents a rise of 2.5% from the stock’s current trading price. Its PB (price-to-book) ratio was 25.80x, and its peers’ average PB ratio was 5.21x, which reflects Mastercard’s premium valuations. Other consumer financial companies (XLF) have the following PB ratios:

  • PayPal Holdings (PYPL): 4.99x
  • Total System Services (TSS): 5.46x
  • Global Payments (GPN): 5.19x

What Led to Mastercard’s Premium Valuations?

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Mastercard reported operating income of $6.2 billion on a trailing 12-month (or TTM) basis. Its basic EPS (earnings per share) in 1H17 was $2.10 compared to $1.76 in 1H16. It made acquisitions worth $1.2 billion in 1H17. It could see a rise in its valuations in the upcoming quarters since the company plans to enter Mexico City for cashless public transportation.

Price-to-earnings ratio

Mastercard (MA) has a PE (price-to-earnings) ratio of 35.14x on a TTM basis. Its peers have the following PE ratios on a TTM basis:

  • PayPal Holdings (PYPL): 50.18x
  • Total System Services (TSS): 32.80x
  • Global Payments (GPN): 60.87x

Levered free cash flow

Mastercard (MA) has generated levered free cash flow of $5.0 billion on a TTM basis. Levered free cash flows for other consumer finance companies on a TTM basis are as follows:

  • Vantiv (VNTV): $0.88 billion
  • PayPal Holdings (PYPL): $5.8 billion
  • Fiserv (FISV): $1.1 billion
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