Key takeaways
View moreMastercard appears slightly undervalued based on its strong financial performance, high profitability metrics significantly above industry averages, and potential for growth in digital payments and AI integration. While the current P/E ratio is above historical averages, the company's robust margins, return on equity, and growth prospects suggest that a premium valuation is justified. However, regulatory risks and competitive pressures temper the upside potential.
- Mastercard's gross and EBITDA margins significantly exceed industry averages, indicating strong profitability and operational efficiency. Specifically, the gross profit margin is 96.20% compared to the industry average of 60.22%, and the EBITDA margin is 64.20% compared to the industry average of 23.29%.
- While Mastercard's profitability metrics are strong, its liquidity ratios (current and quick ratios) are below industry averages, suggesting a need for improved working capital management. The current ratio is 1.11 compared to the industry average of 2.15.
- Mastercard is strategically focused on expanding its digital payment solutions, including contactless payments and tokenization, with 73% of in-person switch transactions being contactless and 35% tokenized.
- The acquisition of Recorded Future enhances Mastercard's cybersecurity capabilities, aligning with the increasing need for security solutions in the digital payments space.
- Mastercard faces regulatory risks, including interchange fee regulations and antitrust investigations, which could impact its profitability and market position.
- Management expects net revenue to grow at the high end of a low double-digits to low-teens range for the full year 2025, driven by growth in payment network revenue and value-added services.
- Compared to peers, Mastercard has shown mixed performance, outperforming American Express (AXP) in the short term but lagging behind Visa (V) over longer periods.
- Mastercard's Enterprise Value to EBITDA and Enterprise Value to Sales ratios are below industry averages, suggesting that it may be relatively undervalued.
- The company is actively returning capital to shareholders through dividends and share repurchases, demonstrating financial strength and commitment to shareholder value. Cash dividends paid were $694 million for the quarter ending March 31, 2025, and the company repurchased $2.5 billion of stock during the same quarter.
- Mastercard is leveraging AI to enhance its products and services, particularly in fraud detection and cybersecurity, creating opportunities for growth and differentiation.
Evaluation summary
Add to research
-
Company Overview:
- Mastercard, Inc. (MA) is a technology company that operates in the global payments industry. It provides payment solutions for credit, debit, prepaid, commercial, and payment programs through its brands, including Mastercard, Maestro, and Cirrus. The company also offers cyber and intelligence solutions.
- Mastercard's key products and services include a payment network that switches payment transactions, consumer payment products (debit, prepaid, bill payments), commercial and new payment flows (commercial cards, disbursements, and remittances), and value-added services and solutions (security, consumer acquisition, business insights, processing, and open banking).
- The company's major customers include issuers, acquirers, and other market participants in the payments ecosystem.
- For comparative analysis, the benchmarks used are the Financial Select Sector SPDR Fund (XLF), and the industry peers are American Express Co. (AXP) and Visa, Inc. (V).
-
Financial Performance:
- Mastercard has demonstrated consistent revenue growth. For the quarter ending March 31, 2025, sales/revenue was $7.245 billion, compared to $6.958 billion for the quarter ending June 30, 2024.
- Net income for the quarter ending March 31, 2025, was $3.280 billion, slightly lower than the $3.342 billion for the quarter ending December 31, 2024.
- Gross profit margin remains high at 96.20% for the quarter ending March 31, 2025, compared to the industry average of 60.22%.
- Net profit margin was 45.27% for the quarter ending March 31, 2025, significantly higher than the industry average of -14.65%.
- EBITDA margin was 64.20% for the quarter ending March 31, 2025, substantially above the industry average of 23.29%.
- Return on Average Assets was 28.86%, Return on Average Total Equity was 188.92%, and Return on Average Total Capital was 69.21% for the quarter ending March 31, 2025, all significantly exceeding industry averages of 0.38%, 3.29%, and 6.93%, respectively.
- The recent earnings call highlighted a strong Q1 performance, with net revenues up 17% and adjusted net income up 13% year-over-year, driven by a diversified business model.
-
Operational Efficiency:
- Total current assets increased from $17.780 billion as of June 30, 2024, to $19.804 billion as of March 31, 2025.
- Total current liabilities increased from $15.594 billion as of June 30, 2024, to $17.828 billion as of March 31, 2025.
- Working capital was $1.976 billion as of March 31, 2025, compared to $2.186 billion as of June 30, 2024.
- Net operating cash flow was $2.354 billion for the quarter ending March 31, 2025, compared to $3.227 billion for the quarter ending June 30, 2024.
- Free cash flow to equity was $2.195 billion for the quarter ending March 31, 2025, compared to $3.112 billion for the quarter ending June 30, 2024.
- Total capital expenditure was $357 million for the quarter ending March 31, 2025, compared to $296 million for the quarter ending June 30, 2024.
- Cash dividends paid were $694 million for the quarter ending March 31, 2025, compared to $615 million for the quarter ending June 30, 2024.
- The company repurchased $2.5 billion of stock during the quarter ending March 31, 2025.
- The current ratio was 1.11 as of March 31, 2025, and the quick ratio was also 1.11, both below the industry averages of 2.15 and 1.79, respectively.
- The total debt to total equity ratio was 281.85% as of March 31, 2025, lower than the industry average of 703.14%.
- Debt/EBITDA was 1.06 as of March 31, 2025, significantly lower than the industry average of 30.90.
-
Growth Opportunities:
- Mastercard is focused on driving sustainable growth across consumer payments, commercial new payment flows, and value-added services and solutions.
- Key initiatives include expanding contactless and tokenization capabilities, advancing crypto payments, scaling commercial payments, and penetrating existing customers with differentiated solutions.
- The company launched Mastercard Agent Pay for AI platforms and is collaborating with cryptocurrency platforms to enable cryptocurrency spending.
- They are also enhancing invoice payment capabilities through partnerships and extending leadership in virtual cards.
- Mastercard is investing in the Chinese market and sees long-term potential, although the immediate revenue impact is small.
- The acquisition of Recorded Future, a threat intelligence company, enhances Mastercard's security and cybersecurity capabilities.
- New and renewed partnerships around the globe are driving growth in consumer payments, including CIMB Niaga in Indonesia and Grupo Promerica in Latin America.
-
Recent Developments and Market Sentiment:
- Mastercard reported strong Q1 2025 results, with net revenue up 17% and adjusted net income up 13% year-over-year.
- The company is leveraging AI to enhance its products and services, particularly in fraud detection and cybersecurity.
- Mastercard is advancing crypto payments by collaborating with cryptocurrency platforms and enabling stablecoin settlement.
- Management highlighted the company's focus on executing against a significant secular opportunity in payments and emphasized the company's diversified business model and resilience.
- Analysts are focused on the composition of cross-border business, the economics of tokenized offerings, and the potential impact of the Capital One/Discover deal.
- The overall tone from management was optimistic, with a focus on delivering long-term strategy and growth.
-
Risks and Threats:
- Regulatory and legislative changes related to the payments industry, including interchange fees and surcharging, pose a risk to Mastercard's profitability.
- Preferential treatment or protective actions by governments for domestic payment providers could restrict Mastercard's ability to compete.
- Evolving privacy, data, and information security regulations present ongoing challenges.
- Legal and regulatory proceedings, including interchange litigation and antitrust investigations, pose financial and reputational risks.
- Competition from traditional players as well as new technologies and business models could impact Mastercard's market share and revenue growth.
- Operational risks related to cybersecurity, service disruptions, and working with new customers/end users could disrupt Mastercard's operations and damage its reputation.
-
Valuation Analysis:
- Enterprise Value to EBITDA was 28.87 for the quarter ending March 31, 2025, compared to the industry average of 41.67.
- Enterprise Value to Sales was 17.60 for the quarter ending March 31, 2025, compared to the industry average of 9.12.
- These metrics suggest that Mastercard may be relatively undervalued compared to its industry peers.
- Potential catalysts include continued growth in digital payments, successful integration of acquisitions, and favorable regulatory outcomes.
-
Price Performance:
- The stock price has shown volatility, with fluctuations between $479.16 and $583.28 from March 21, 2025, to May 16, 2025.
- Over the past year, Mastercard has outperformed the Financial Select Sector SPDR Fund (XLF), with returns of 27.64% versus 25.01%, respectively.
- However, over the past two years, Mastercard has underperformed XLF, with returns of 53.47% versus 63.27%.
- Compared to peers, Mastercard has underperformed Visa (V) over the past year but has outperformed American Express (AXP).
-
Future Outlook:
- Mastercard expects net revenue to grow at the high end of a low double-digits to low-teens range for the full year 2025 on a currency-neutral basis, excluding acquisitions.
- Acquisitions are expected to add 1 to 1.5 percentage points to this growth rate.
- Operating expense growth is expected to be at the low end of a low double-digits range, excluding acquisitions and special items, with acquisitions increasing the OpEx growth rate by approximately 5 percentage points.
- The company assumes consumer spending remains healthy but acknowledges increased economic and geopolitical uncertainty.
- Analysts are monitoring consumer health and spending habits, the impact of the Capital One/Discover deal, and the contribution of China to Mastercard's revenue projections.
-
Summary:
- Mastercard exhibits strong financial performance, characterized by consistent revenue growth, high profitability, and healthy cash flow generation.
- The company's liquidity is adequate but could be improved, while its solvency is healthy, with a relatively low level of financial risk.
- Mastercard faces risks from regulatory changes, competition, and operational challenges, but is well-positioned to capitalize on the increasing adoption of digital payments and deliver long-term growth.
- Strengths include a diversified business model, strong brand recognition, and a focus on innovation.
- Weaknesses include lower liquidity ratios compared to industry averages and exposure to regulatory risks.
- Opportunities include expanding into new markets, leveraging AI and other technologies, and forming strategic partnerships.
- Threats include increasing competition, regulatory changes, and cybersecurity risks.
- Overall, Mastercard presents a favorable investment profile, with strong growth potential and a solid financial foundation. However, investors should closely monitor regulatory developments, competitive dynamics, and macroeconomic conditions.
Price history
Add to research
Fundamentals
Add to research
Insights
- Mastercard exhibits strong financial performance, characterized by consistent revenue growth, high profitability, and healthy cash flow generation.
- The company's liquidity is adequate but could be improved, while its solvency is healthy, with a relatively low level of financial risk.
- Mastercard faces risks from regulatory changes, competition, and operational challenges, but is well-positioned to capitalize on the increasing adoption of digital payments and deliver long-term growth.
- Strategic initiatives, such as acquisitions and investments in new technologies, are driving growth in intangible assets and enhancing Mastercard's competitive position.
- Management's focus on returning capital to shareholders through share repurchases and dividends reflects confidence in the company's future prospects.
Analysis
- Revenue
- Mastercard has demonstrated consistent revenue growth, driven by the increasing adoption of digital payments and strategic initiatives.
- The company's diversified business model and geographic reach contribute to its resilience and ability to generate revenue.
- Sales/revenue is significantly above the industry average, reflecting Mastercard's strong market position.
- Profitability
- Mastercard exhibits strong profitability, with high return on assets, equity, and capital, as well as high EBITDA and net profit margins.
- The company's high gross margin reflects its strong competitive position and pricing power.
- Efficient expense management contributes to improved profitability.
- Liquidity
- Mastercard's short-term liquidity is adequate but could be improved, as its current and quick ratios are below the industry averages.
- The company has sufficient operating cash flow to meet its short-term obligations.
- Working capital management could be optimized to enhance liquidity.
- Solvency
- Mastercard's solvency is healthy, with a debt-to-equity ratio and debt/EBITDA that are below the industry averages, suggesting a lower level of financial risk.
- The company has the capacity to service its debt obligations comfortably.
- Long-term debt has increased, possibly due to recent debt issuances to fund operations and investments.
- Operational Efficiency
- Mastercard demonstrates efficient asset utilization, as indicated by the increase in accounts receivable and intangible assets.
- The company's capital allocation strategy balances organic growth, acquisitions, and shareholder returns.
- EBITDA margin is significantly above the industry average, reflecting Mastercard's strong operational efficiency.
- Cash Flow Analysis - Mastercard generates strong operating cash flow, providing ample liquidity for short-term obligations. - Free cash flow (FCF) generation supports long-term solvency and financial flexibility. - Cash dividends paid have steadily increased, reflecting a commitment to shareholder returns.
- Risk Factors
- Regulatory and legislative changes related to the payments industry, including interchange fees and surcharging, pose a risk to Mastercard's profitability.
- Competition from traditional players as well as new technologies and business models could impact Mastercard's market share and revenue growth.
- Operational risks related to cybersecurity, service disruptions, and working with new customers/end users could disrupt Mastercard's operations and damage its reputation.
- Future Outlook
- Continued revenue growth is expected, driven by the increasing adoption of digital payments and the company's strategic initiatives.
- Profitability margins are projected to remain strong, supported by efficient cost management and pricing power.
- Mastercard is well-positioned to capitalize on the secular opportunity in payments and deliver long-term growth.
- Profitability
Financial statements
Add to research
Loading...
Public filings
Add to research
- Mastercard is a leading global payments technology company, connecting a wide range of participants in the payments ecosystem through its extensive network and suite of products and services.
- The payments industry is highly competitive and subject to increasing regulation, particularly around interchange fees, data privacy/security, and anti-competitive practices. Mastercard faces risks from both traditional competitors as well as new technologies and business models.
- Mastercard has continued to grow its core business, diversify its customer base and geographic reach, and invest in new services and solutions to drive future growth. However, it remains exposed to significant legal and regulatory risks, particularly the ongoing interchange litigation in the U.S. and Europe.
- Mastercard's strong financial performance, high profitability, and healthy liquidity position have enabled it to return substantial capital to shareholders through share repurchases and dividends. However, the company's growth and profitability could be impacted by regulatory changes, competitive pressures, and legal/operational risks.
- Overall, Mastercard appears to be navigating a complex and evolving payments landscape effectively, but faces ongoing challenges and uncertainties that require close monitoring and proactive risk management.
Core Business and Operations:
- Mastercard is a technology company in the global payments industry, connecting consumers, financial institutions, merchants, governments, and other organizations through electronic payment solutions and services
- Key products and services include:
- Payment network that switches (authorizes, clears, and settles) payment transactions
- Consumer payment products (debit, prepaid, bill payments)
- Commercial and new payment flows (commercial cards, disbursements and remittances)
- Value-added services and solutions (security, consumer acquisition, business insights, processing, open banking)
- Major customers include issuers, acquirers, and other market participants in the payments ecosystem
- Competes with general purpose payment networks, debit/local networks, real-time account-based payment systems, digital wallets/fintechs, and government-backed payment solutions
Industry and Market Trends:
- Payments industry is highly competitive and subject to increasing regulation, including around interchange fees, surcharging, data privacy/security, and anti-money laundering
- Governments have taken actions to promote domestic/regional payment providers, which could restrict Mastercard's ability to compete
- Rapid technological changes and new payment methods (e.g. cryptocurrencies, CBDCs) pose both opportunities and risks
Recent Events:
- Acquired Recorded Future, a threat intelligence company, to enhance Mastercard's security and cybersecurity capabilities
- Issued $4 billion in new debt across multiple tranches to fund operations and investments
- Continued to settle litigation with merchants over interchange fees, with over 90% of U.S. interchange volume now resolved
Risk Factors:
- Regulatory and legislative changes related to payments industry, including interchange fees and surcharging
- Preferential treatment or protective actions by governments for domestic payment providers
- Evolving privacy, data, and information security regulations
- Legal and regulatory proceedings, including interchange litigation
- Competition from traditional players as well as new technologies and business models
- Operational risks related to cybersecurity, service disruptions, and working with new customers/end users
- Reliance on key customers and potential consolidation in the industry
Legal Matters:
- Ongoing litigation and regulatory proceedings related to interchange fees in the U.S. and Europe
- Antitrust investigation by the European Commission into Mastercard's network fee practices
- Class action lawsuits related to ATM non-discrimination rules and EMV liability shift
Management's Discussion and Analysis:
- Strong financial performance, with 12% growth in net revenue and 13% growth in operating expenses in 2024
- Continued growth in key business drivers like gross dollar volume, cross-border volume, and switched transactions
- Profitability remained high, with operating margin of 54.2% in 2024
- Healthy liquidity position, with $26.6 billion in cash, cash equivalents, and investments as of December 31, 2024
- Returned significant capital to shareholders through $11 billion in share repurchases and $2.4 billion in dividends in 2024
Earnings calls
Add to research
Earnings Report 2025Q1 (2025-05-01)
Key takeaways
- Diversification is Key: Mastercard's diversified business model, both geographically and across product lines, provides resilience in an uncertain macroeconomic environment.
- Secular Trends Drive Growth: The shift from cash to digital payments and the increasing need for cybersecurity solutions are powerful secular trends that support Mastercard's long-term growth.
- AI is Integral: Mastercard is leveraging AI to enhance its products and services, particularly in fraud detection and cybersecurity, creating opportunities for growth.
- Strategic Partnerships are Crucial: Mastercard's ability to form and maintain strategic partnerships is essential for expanding its reach and capturing market share.
- China Remains a Long-Term Opportunity: While the immediate revenue impact from China is small, the company is investing in the market and sees long-term potential.
- Incentive Management is Complex: The timing and structure of rebates and incentives can significantly impact revenue and profitability, requiring careful management.
- Macroeconomic Uncertainty Requires Vigilance: Mastercard is closely monitoring macroeconomic factors and is prepared to adjust its expense levers as needed.
Focus of management’s prepared remarks
- Strong Q1 Performance: Net revenues were up 17% and adjusted net income up 13% versus a year ago, driven by a diversified business model.
- Secular Opportunity in Payments: Mastercard is successfully executing against a significant secular opportunity in payments, which is a core part of their growth algorithm.
- Digital Transformation Leadership: Mastercard is at the forefront of digital transformation, delivering solutions that address evolving customer needs and make payments simple, smart, and secure.
- Resilient Business Model: The company has a well-diversified business geographically and by product, manages expenses closely, and has levers to pull if needed.
- Consumer Payments Innovation: Innovations like contactless capabilities and tokenization are foundational for payments in the digital economy, with 73% of in-person switch transactions being contactless and 35% tokenized.
- Agentic AI and Crypto Advancements: The launch of Mastercard Agent Pay and collaborations with companies like Microsoft and OpenAI aim to redefine commerce in the AI era. The company is also advancing crypto payments by collaborating with cryptocurrency platforms and enabling stablecoin settlement.
- Commercial New Payment Flows Expansion: Mastercard launched commercial point-of-sale solutions and partnered with Corpay to enhance corporate cross-border payment solutions.
- Value-Added Services and Solutions Growth: Approximately 85% of value-added services and solutions revenues are recurring, providing a stable baseline for growth. The company is leveraging one-to-many distribution with global technology partners.
- AI Integration: AI is deeply ingrained in the business, enabling solutions in the market today, with AI enabling approximately one in three of their products within value-added services and solutions in 2024.
- Strategic Partnerships: New and renewed partnerships around the globe are driving growth in consumer payments, including CIMB Niaga in Indonesia and Grupo Promerica in Latin America.
Focus of the analyst Q&A
- Composition of Cross-Border Business:
- What is the breakdown of cross-border volume between travel, e-commerce, and e-retail?
- What is the significance of U.S. inbound travel overall?
- Economics of Tokenized Offerings:
- What is the potential for further tokenization growth beyond the current 35% of card-not-present transactions?
- What are the economic implications of tokenization for Mastercard over the next several years?
- Operating Expense Cadence:
- What is the expected cadence of operating expenses throughout the year?
- What portion of operating expense growth is discretionary versus non-discretionary?
- What are the one-time costs associated with the Recorded Future integration?
- Consumer Spending Health:
- Are there any concerning trends in consumer health and spending habits, particularly with tariffs and geopolitical tensions?
- Is the company seeing any upfronting of spending?
- Impact of Capital One/Discover Deal:
- What is the potential impact on Mastercard's financials if Capital One migrates its debit portfolio to the Discover network?
- China Revenue Contribution:
- How significant is China as a contributor to Mastercard's revenue projections in the near term?
- Full Year Guidance Assumptions:
- What are the underlying assumptions for switch volume and cross-border growth in the full-year guidance?
- What is the assumption for FX volatility?
- Pricing Opportunities:
- What are the opportunities for instituting new pricing strategies in the second half of the year?
- What areas offer the most potential for price increases based on the value provided?
- Incentives and Contract Economics:
- How do incentives and rebates work at the beginning and end of contracts, particularly with wins and migrations?
- Idiosyncratic Assets in a Slowing Environment:
- What unique assets does Mastercard possess that could allow it to outperform peers in a slowing economic environment?
- Transaction Processing Yields:
- What factors contributed to the jump in transaction processing yields in Q1, despite a volume slowdown?
- Crypto Partnerships Economics:
- How is Mastercard thinking about the economics of incorporating crypto partnerships?
- How are these partnerships impacting relationships with traditional issuers?
Summary
-
Financial Performance
Mastercard reported a strong Q1 2025 with net revenue up 17% and adjusted net income up 13% year-over-year on a non-GAAP currency-neutral basis. EPS was $3.73, including an $0.08 contribution from share repurchases. These results reflect continued growth in the payment network and value-added services. The company repurchased $2.5 billion of stock during the quarter and an additional $884 million through April 28, 2025. Operating expenses increased 14%, including a 4 ppt increase from acquisitions.
-
Revenue Drivers
Growth in payment network revenue was driven by domestic and cross-border transaction and volume growth, as well as growth in rebates and incentives. Value-added services and solutions revenue increased due to scaling of security, digital, and authentication solutions, demand for consumer acquisition and engagement services, and growth in underlying drivers and price-set. Cross-border volume increased 15% globally, driven by both travel and non-travel related spending. Contactless penetration aided card-present growth, representing approximately 73% of in-person switch purchase transactions.
-
Profit Margins and Cost Management
Operating income increased 19%, including a 1 ppt headwind from acquisitions. Operating expenses increased 14%, including a 4 ppt impact from acquisitions. Expense growth was primarily driven by increased spending to support strategic initiatives. The company expects operating expense growth to increase in the second half of the year due to investments in frontline resources, infrastructure, and service development. The non-GAAP tax rate is expected to be in the 20% to 20.5% range for both Q2 and the full year.
-
Guidance and Outlook
Mastercard expects net revenue to grow at the high end of a low double-digits to low-teens range for the full year 2025 on a currency-neutral basis, excluding acquisitions. Acquisitions are expected to add 1 to 1.5 ppt to this growth rate. Operating expense growth is expected to be at the low end of a low double-digits range, excluding acquisitions and special items, with acquisitions increasing the OpEx growth rate by approximately 5 ppt. For Q2 2025, net revenue growth is expected to be in the low teens range, with acquisitions contributing 1 to 1.5 ppt. The company assumes consumer spending remains healthy but acknowledges increased economic and geopolitical uncertainty.
-
Strategic Initiatives
Mastercard is focused on driving sustainable growth across consumer payments, commercial new payment flows, and value-added services and solutions. Key initiatives include expanding contactless and tokenization capabilities, advancing crypto payments, scaling commercial payments, and penetrating existing customers with differentiated solutions. The company launched Mastercard Agent Pay for AI platforms and is collaborating with cryptocurrency platforms to enable cryptocurrency spending. They are also enhancing invoice payment capabilities through partnerships and extending leadership in virtual cards.
-
Management Commentary
Management highlighted the company's strong Q1 results and its focus on executing against a significant secular opportunity in payments. They emphasized the company's diversified business model, resilience, and ability to manage expenses. The CEO expressed excitement about advancements in Agentic AI and crypto. Management is monitoring the macroenvironment and prepared to adjust as needed. The overall tone was optimistic, with a focus on delivering long-term strategy and growth.
-
Industry and Market Conditions
The company acknowledged an uncertain environment with weakened consumer and business sentiment due to tariffs and geopolitical tensions. However, they noted that fundamentals supporting consumer spending have been solid, with low unemployment rates and wage growth outpacing inflation. They are closely monitoring US-China relationships and the impact of tariffs. The company sees tremendous secular opportunity in Africa and is partnering with mobile network operators to unlock it.
Comparative analysis
Add to research
Benchmarks (as of 2025-05-16)
Financial Select Sector SPDR Fund (XLF)
- Performance Comparison:
- Mastercard, Inc. (MA) has shown mixed performance compared to the Financial Select Sector SPDR Fund (XLF). Over the past year, MA has outperformed XLF, with returns of 27.64% versus 25.01%, respectively. However, over the past two years, MA has underperformed XLF, with returns of 53.47% versus 63.27%. Over a three-year period, MA has outperformed XLF, with returns of 76.66% versus 65.54%. More recently, MA has outperformed XLF year-to-date, with returns of 12.0% versus 7.4%.
- Risk and Return Analysis:
- The annualized returns show that MA has provided higher returns than XLF over the 1-year and 3-year periods, but lower returns over the 2-year period. Specifically, MA's annualized returns are 27.64% (1 year), 23.88% (2 years), and 20.89% (3 years), compared to XLF's 25.01%, 27.78%, and 18.3%, respectively.
- The annualized volatility of MA has generally been higher than XLF, indicating that MA is more volatile. For example, in Q2 2022, MA's volatility ranged from 35.34% to 42.57%, while XLF's ranged from 27.77% to 30.12%.
- The maximum drawdown for MA was -28.25% on 2022-10-12, while for XLF it was -25.81% on the same date. This suggests that MA has a higher risk profile, as it experienced a larger peak-to-trough decline.
- Risk-Adjusted Performance:
- The Sharpe Ratio of MA has fluctuated over time, and in recent periods, XLF has shown higher Sharpe Ratios, indicating better risk-adjusted returns. As of May 2025, the Sharpe Ratio for MA is 1.28, while for XLF it is 1.17.
- The Beta value of MA has decreased over time, indicating that its sensitivity to market movements has decreased. As of May 2025, the beta for MA is 0.73, while for XLF it is 0.81. This suggests that MA is now less volatile than the market.
- Overall Assessment:
- Based on the analysis, Mastercard, Inc. (MA) has shown mixed performance compared to the Financial Select Sector SPDR Fund (XLF). While MA has outperformed XLF over the past year and three years, it has underperformed over the past two years. MA has generally been more volatile than XLF, as indicated by its higher annualized volatility and maximum drawdown. However, MA's beta has decreased over time, suggesting a lower risk profile. In recent periods, XLF has shown higher Sharpe Ratios, indicating better risk-adjusted returns.
Peers Price History(as of 2025-05-16)
- Performance Comparison:
- Mastercard (MA) has shown mixed performance compared to its peers. Over the past year, MA has underperformed Visa (V) by -4.4%, but has outperformed American Express (AXP) by 2.54%. However, over longer periods (2 and 3 years), MA has underperformed both AXP and V. For instance, over the last 3 years, MA's performance was 76.66%, while AXP's was 103.53% and V's was 87.69%.
- Risk and Return Analysis:
- The annualized returns show that MA has lower returns compared to AXP over 2 and 3 year periods. For example, the 2-year annualized return for MA is 23.88%, while AXP is 40.58%.
- In terms of annualized volatility, AXP generally exhibits higher volatility compared to MA and V. In Q2 2025, AXP's volatility ranged from 53.9% to 62.35%, while MA's ranged from 37.79% to 40.13% and V's ranged from 38.33% to 41.32%.
- The maximum drawdown for MA was -28.25% on 2022-10-12, which is less severe than AXP's -31.55% on 2022-09-30, but similar to V's -28.6% on 2022-09-30. This suggests that MA's risk profile is moderate compared to its peers.
- Risk-Adjusted Performance:
- The Sharpe Ratio analysis indicates that AXP generally offers better risk-adjusted returns compared to MA and V.
- The Beta value for MA is generally around or below 1, indicating lower sensitivity to market movements compared to AXP, which has a Beta consistently above 1.
- Overall Assessment:
- Mastercard (MA) presents a mixed profile when compared to American Express (AXP) and Visa (V). While MA has shown competitive short-term performance, it lags behind AXP in terms of annualized returns and risk-adjusted performance (Sharpe Ratio). AXP also exhibits higher volatility and Beta, indicating a more aggressive risk profile. Visa (V) generally shows similar volatility to MA, but has provided better returns over certain periods.
- A significant trend is that AXP consistently demonstrates higher volatility and Beta, suggesting it is more sensitive to market fluctuations. Investors should consider their risk tolerance when choosing between these stocks.
Peers Fundamentals(as of 2025-03-31)
-
Market Position and Size:
- Mastercard (MA) holds a significant market position with a market capitalization of $532,488.11 million, placing it between American Express (AXP) at $209,686.29 million and Visa (V) at $713,418.52 million.
- While MA's revenue ($29,053 million) is less than both AXP ($75,333 million) and V ($37,621 million), its net income ($13,143 million) surpasses AXP ($10,200 million), indicating a more efficient business model.
- MA's market capitalization reflects its strong brand recognition and established presence in the payment solutions industry.
-
Profitability and Efficiency:
- MA demonstrates exceptional profitability, with a Gross Profit Margin of 96.71%, significantly higher than AXP (60.89%), V (77.1%), and the industry average (60.22%).
- Its EBITDA Margin of 60.98% is greater than AXP (29.13%) and the industry average (23.29%), though less than V (70.38%).
- MA's Net Profit Margin of 45.24% exceeds AXP (13.54%) and the industry average (-14.65%), but is less than V (52.21%).
- These high profit margins, despite lower revenue compared to peers, highlight MA's efficient cost management and strong pricing strategy.
-
Financial Health and Stability:
- MA's Current Ratio of 1.11 is slightly greater than V (1.08) but less than the industry average (2.15), indicating moderate liquidity.
- Its Total Debt to Total Equity Ratio of 281.85 is greater than AXP (169.2) and V (54.59) but less than the industry average (703.14), suggesting a higher reliance on debt compared to its peers.
- MA's Debt / EBITDA ratio of 1.06 is less than AXP (2.41) but greater than V (0.78), and significantly less than the industry average (30.9), indicating manageable debt levels relative to its earnings.
-
Valuation and Market Perception:
- MA's Enterprise Value To Sales ratio of 17.6 is significantly greater than AXP (2.51) but less than V (18.5), and greater than the industry average (9.12).
- Its Price To Earnings ratio of 41.13 is greater than AXP (20.91) and V (37.42), and greater than the industry average (19.32).
- MA's Price to Book Ratio of 79.99 is significantly greater than AXP (6.72) and V (19.24), and greater than the industry average (3.51).
- These elevated valuation metrics suggest that the market has high expectations for MA's future performance.
-
Cash Flow and Capital Management:
- MA's Net Operating Cash Flow of $15,449 million is greater than AXP ($13,262 million) but less than V ($21,889 million).
- Its Free Cash Flow of $14,276 million is greater than AXP ($11,312 million) but less than V ($20,508 million).
- MA's strong cash flow generation, as evidenced by its substantial free cash flow, indicates efficient capital management.
-
Growth and Future Prospects:
- MA shows superior growth in Sales/Revenue and EBITDA, particularly in Year -4 to -3.
- Its EBIT Margin growth is also consistently higher than the peer group average.
- However, MA's Free Cash Flow and Free Cash Flow Margin growth are consistently lower than the peer group average.
- MA's most recent year-over-year growth rates for Sales/Revenue, EBITDA, and Free Cash Flow are greater than its 5-year CAGRs, indicating acceleration trends.
-
Potential for Investment:
- MA presents an attractive investment opportunity due to its strong financial health, superior profitability, and efficient returns.
- Its substantial market capitalization and robust cash flow generation further enhance its investment appeal.
- However, its higher valuation metrics and reliance on debt compared to Visa warrant careful consideration.
-
Key Risks and Considerations:
- MA's higher valuation metrics suggest that the market has high expectations for its future performance, which may not be sustainable.
- Its reliance on debt compared to Visa could pose a risk if interest rates rise or if its earnings decline.
- Its lower Free Cash Flow and Free Cash Flow Margin growth compared to the peer group average could indicate potential challenges in sustaining its cash flow generation.
-
Overall Assessment:
- Mastercard (MA) exhibits strong financial health and performance, characterized by high profitability, efficient returns, and robust cash flow generation.
- Its competitive position within the payment solutions industry is supported by its substantial market capitalization and strong brand recognition.
- However, its higher valuation metrics and reliance on debt compared to Visa warrant careful monitoring.
Comparison metrics
Add to research