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Mastercard Has Higher Valuations—Here’s Why

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Price-to-book ratio

Mastercard’s (MA) PBV (price-to-book value ratio) is 18.08x on a next-12-month basis. The company has a premium valuation, as its competitors’ average is 4.2x. 

MA’s competitors Visa (V), Total System Services (TSS), and Ally Financial (ALLY) have PBVs of 7.0x, 4.80x, and 0.80x, respectively, on a next-12-month basis.

Mastercard currently has a premium valuation, primarily because of expectations of strong 1Q18 results. In 1Q18, the company is expected to post higher EPS (earnings per share) than it did in the previous quarter or 1Q17. The company will likely experience upward momentum in 2018, as e-commerce is expected to experience an uptrend.

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Cross-border revenue

Mastercard witnessed the positive impact in cross-border volumes in January 2018, mainly because of cryptocurrency, which could help the company in its March 2018 results as well because its cross-border revenue could experience an uptrend. President Donald Trump’s decision to impose tariffs could lead to a rise in inflation, positively impacting the company’s business.

In 2018, Mastercard could benefit from further deployments toward digital tools. Additionally, the company could also benefit from Masterpass’s integration with the My Phillips 66 app in terms of transaction volumes.

Mastercard’s PBV on a trailing-12-month basis is 33.68x. Its peers (XLF) Visa, Total System Services, and Ally Financial have trailing-12-month PBVs of 8.16x, 6.90x, and 0.89x, respectively.

Next, let’s take a look at analysts’ ratings for Mastercard.

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