Mastercard Incorporated
Mastercard Incorporated (NYSE: MA) is a payments technology firm with a global presence. With connections in over 210 nations and territories, it constructs a sustainable world that unlocks priceless opportunities for everybody.
Why should investors Book Profits?
- Significantly leveraged balance sheet: The company is exposed to a higher balance sheet risk than its peers, with a Debt/Equity ratio of 1.90x as of December 31, 2021, compared to the industry median of 0.47x, implying a higher balance sheet risk. Furthermore, its %Long Term Debt to Total Capital ratio was 61.5%, compared to the industry median of 24.3% for a similar period. These leveraged financials put the company at the brink of wild swings on the slightest interest rate movements.
- High Cash Conversion Days: Compared to the industry, the company has a long Cash Conversion Cycle (Days), meaning that it takes more days to convert its inventory to cash. In FY21, its Cash Cycle was 84.7 days, compared to an industry median of 40.4 days.
- Weak Liquidity Profile: The company's current ratio as of December 31, 2021, is 1.29x, compared to the industry median of 2.66x. These lower ratios in comparison to the industry suggest that the company's short-term obligations are expanding faster than its resources to fulfil them, which is not a good sign.
Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation
(Analysis by Kalkine Group)
* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation:
MA's share price has surged 9.58% in the past three months and is currently leaning towards the higher band of the 52-week range of USD 306.00 to USD 401.50. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 350.24. Considering the company's highly leveraged balance sheet, rising interest rates, current valuation, and other resistance at the current levels, we recommend a "Sell" rating on the stock at the closing price of USD 382.20, down 2.02% as of February 04, 2022.
Three-Year Technical Price Chart (February 04, 2022). Analysis by Kalkine Group
* The reference data in this report has been partly sourced from REFINITIV.
* All forecasted figures and industry information have been taken from REFINITIV.
Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.
Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.
There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.
You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.
The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.
Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.
Please also read our Terms & Conditions and Financial Services Guide for further information.
On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website unless those persons comply with certain safeguards, procedures, and disclosures.
Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.