MasterCard, Inc. (MA)

finviz.com

Economy is starting to tick upward as will credit card purchases.

a good stock

I am going to do a Cross Sectional Analysis on five of the largest credit card companies, analyze the risk involved with the industry and determine on a relative basis which stock is undervalued. The companies I am evaluating are Discover Financial, American Express, Visa, Capital One and MasterCard…

Read the report at
http://stocklook.blogspot.com/

Or after Wednesday, October 28
http://stocklook.blogspot.com/2009/10/credit-card-stocks-dfs-axp-v-cof-and-ma.html

I set a screen with the following: Greater than 15% 13 week price change, $10 cash per share or more, greater than 15% institutional ownership, and EPS of $5 or more. The idea was to look for companies that are in acquisition mode (or targets thereof).

This account tracks the performance of the investment firm Ruane, Cunniff, and Goldfarb - the investment manager of Sequoia Fund.

MA will benefit from the megatrend of increased usage of debit cards. MA makes money from transaction fees each time the card is used. They do not carry the credit. In 2010 the EU is slated to end the oligopoly of government credit cards which will open the European market to MA and V. MA increased their revenue in the 2nd quarter of '09. Few companies were able to achieve that. MA is also projecting big increases in 2nd half '09 income v prior year.

Short Squeeze.

Electronic transactions will continue to grow. I don't see banks or other companies innovating in this arena. Look for Visa and MasterCard to grow consistently year after year.

Very similar model to Visa. I purchased Visa a little early so this looks like a good entry point for MA.

PEG = 0.93

Fortune 40

Medium growth profitable market share leader at reasonable price.

This company has great earnings growth. Income was only lower last year due to a rather large litigation expense. But this isn't one to worry about. Four years to double revenues is excellent. Long-term growth will raise stock price up well over the S&P.

As the economy improves, Americans will be back to old habits of buying via credit cards, and MCard will only benefit from that.

The honeymoon for MA is over and I now believe this is a good price point to initiate an outperform pick. This was a tough call to make. I would not be surprised in the least if the S&P outperforms MA in the near term given current levels, but this is a long term pick, and I believe their strong business model warrants an outperform.
MA continues to beat expectations and I believe they have the ability to continue to do so. This firm does an outstanding job of brining revenue to the bottom line. Through a cost cutting effort, MA was able to increase operating margin, by my calculations, from 27% in 2007 to 39% in 2008 gross of litigation costs. They are currently projecting flat operating expenses for 2009. They were able to increase processing fees in the fourth quarter. Thanks to MAs business model, any incremental revenue from price increases and growth should go straight to the bottom line.
Two things I don't like are their high tax rate and the ever present litigation risk. The settlement this year of two large cases with Amex and Discover wiped out their earnings for the year. This is a wild card that is nearly impossible to predict, however with those settlements behind them, I'm predicting very strong earnings for the next several years.

Mastercard is a "toll taker" type stock which will continue to outperform in this down market. The pick is a bit late but I'm confident it will still outperform.

Bullish on this one and Visa. It's not good to issue credit card debt, but it is good to be a processor

Believe this will start to rebound last quarter 2009. Possible 15-20%. have this one on my watch list.