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

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