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Mastercard Has Premium Valuations after Strong Q2 2018 Results

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Premium valuations

Mastercard (MA) has a price-to-earnings ratio of 28.04x on an NTM (next-12-month) basis compared to the peer average of 15.95x. Mastercard’s management had positive views on the US economy, as consumer confidence and strong jobs growth supported economic growth in the second quarter.

Mastercard’s competitors have the following price-to-earnings ratios on an NTM basis:

  • American Express (AXP): 13.06x
  • Visa (V): 26.13x
  • Discover Financial Services (DFS): 8.68x

According to Mastercard’s management, in the second quarter, the economic environment in the United Kingdom was unfavorable. Lower consumer confidence impacted retail sales growth.

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Outlook on the overall industry

In the rest of 2018, the performance of the consumer finance industry will likely be dependent on the business environment, employment levels, as well as the spending behavior. Mastercard B2B hub, which streamlines the payments between the companies and their suppliers, will become available even for large businesses. Currently, it facilitates payments of small and medium enterprises.

Mastercard’s competitor, Visa, also plans to increase its presence in the B2B market. The company plans to improve its B2B offerings.

On an LTM (last-12-month) basis, Mastercard’s price-to-earnings ratio is 38.12x, while its competitors (IYF) have the following price-to-earnings ratios:

  • American Express (AXP): 14.79x
  • Visa (V): 37.64x
  • Discover Financial Services (DFS): 10.03x
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