Intrinsic value of Mastercard - MA

Previous Close

$132.37

  Intrinsic Value

$122.89

stock screener

  Rating & Target

hold

-7%

  Value-price divergence*

+68%

Previous close

$132.37

 
Intrinsic value

$122.89

 
Up/down potential

-7%

 
Rating

hold

 
Value-price divergence*

+68%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of MA stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 142.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  11.47
  11.80
  11.12
  10.51
  9.96
  9.46
  9.02
  8.61
  8.25
  7.93
  7.63
  7.37
  7.13
  6.92
  6.73
  6.56
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.40
  5.36
  5.32
Revenue, $m
  10,776
  12,048
  13,387
  14,794
  16,267
  17,806
  19,411
  21,084
  22,823
  24,633
  26,513
  28,468
  30,498
  32,609
  34,803
  37,085
  39,458
  41,928
  44,500
  47,179
  49,972
  52,883
  55,921
  59,092
  62,402
  65,861
  69,475
  73,254
  77,207
  81,342
  85,669
Variable operating expenses, $m
 
  4,606
  5,098
  5,615
  6,157
  6,723
  7,313
  7,928
  8,568
  9,233
  9,925
  10,468
  11,214
  11,990
  12,797
  13,636
  14,509
  15,417
  16,363
  17,348
  18,375
  19,445
  20,562
  21,728
  22,946
  24,217
  25,546
  26,936
  28,389
  29,910
  31,501
Fixed operating expenses, $m
 
  920
  943
  967
  991
  1,016
  1,041
  1,067
  1,094
  1,121
  1,150
  1,178
  1,208
  1,238
  1,269
  1,301
  1,333
  1,366
  1,401
  1,436
  1,471
  1,508
  1,546
  1,585
  1,624
  1,665
  1,706
  1,749
  1,793
  1,838
  1,884
Total operating expenses, $m
  5,015
  5,526
  6,041
  6,582
  7,148
  7,739
  8,354
  8,995
  9,662
  10,354
  11,075
  11,646
  12,422
  13,228
  14,066
  14,937
  15,842
  16,783
  17,764
  18,784
  19,846
  20,953
  22,108
  23,313
  24,570
  25,882
  27,252
  28,685
  30,182
  31,748
  33,385
Operating income, $m
  5,761
  6,522
  7,346
  8,212
  9,119
  10,067
  11,057
  12,088
  13,161
  14,278
  15,439
  16,822
  18,076
  19,381
  20,737
  22,148
  23,616
  25,145
  26,737
  28,396
  30,125
  31,930
  33,813
  35,779
  37,832
  39,979
  42,222
  44,569
  47,025
  49,594
  52,285
EBITDA, $m
  6,134
  6,861
  7,703
  8,588
  9,516
  10,485
  11,496
  12,550
  13,647
  14,789
  15,975
  17,209
  18,491
  19,824
  21,210
  22,652
  24,153
  25,715
  27,342
  29,037
  30,805
  32,649
  34,573
  36,582
  38,681
  40,874
  43,167
  45,566
  48,075
  50,701
  53,450
Interest expense (income), $m
  74
  181
  230
  286
  345
  406
  471
  538
  608
  680
  756
  835
  917
  1,001
  1,090
  1,182
  1,277
  1,376
  1,480
  1,587
  1,699
  1,816
  1,938
  2,065
  2,198
  2,336
  2,481
  2,632
  2,790
  2,955
  3,128
Earnings before tax, $m
  5,646
  6,340
  7,116
  7,926
  8,774
  9,661
  10,586
  11,550
  12,554
  13,598
  14,683
  15,987
  17,160
  18,379
  19,647
  20,966
  22,339
  23,768
  25,257
  26,808
  28,426
  30,114
  31,875
  33,714
  35,635
  37,643
  39,742
  41,937
  44,235
  46,639
  49,156
Tax expense, $m
  1,587
  1,712
  1,921
  2,140
  2,369
  2,608
  2,858
  3,119
  3,390
  3,671
  3,964
  4,316
  4,633
  4,962
  5,305
  5,661
  6,032
  6,417
  6,819
  7,238
  7,675
  8,131
  8,606
  9,103
  9,621
  10,163
  10,730
  11,323
  11,943
  12,593
  13,272
Net income, $m
  4,059
  4,628
  5,195
  5,786
  6,405
  7,053
  7,728
  8,432
  9,164
  9,926
  10,719
  11,670
  12,527
  13,417
  14,342
  15,305
  16,308
  17,351
  18,438
  19,570
  20,751
  21,983
  23,269
  24,611
  26,013
  27,479
  29,011
  30,614
  32,291
  34,046
  35,884

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  8,335
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  18,675
  15,999
  17,779
  19,647
  21,603
  23,647
  25,779
  27,999
  30,310
  32,713
  35,210
  37,805
  40,502
  43,305
  46,219
  49,249
  52,401
  55,682
  59,097
  62,655
  66,363
  70,230
  74,264
  78,475
  82,871
  87,465
  92,265
  97,283
  102,532
  108,024
  113,771
Adjusted assets (=assets-cash), $m
  10,340
  15,999
  17,779
  19,647
  21,603
  23,647
  25,779
  27,999
  30,310
  32,713
  35,210
  37,805
  40,502
  43,305
  46,219
  49,249
  52,401
  55,682
  59,097
  62,655
  66,363
  70,230
  74,264
  78,475
  82,871
  87,465
  92,265
  97,283
  102,532
  108,024
  113,771
Revenue / Adjusted assets
  1.042
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
Average production assets, $m
  1,467
  1,638
  1,821
  2,012
  2,212
  2,422
  2,640
  2,867
  3,104
  3,350
  3,606
  3,872
  4,148
  4,435
  4,733
  5,044
  5,366
  5,702
  6,052
  6,416
  6,796
  7,192
  7,605
  8,036
  8,487
  8,957
  9,449
  9,963
  10,500
  11,062
  11,651
Working capital, $m
  6,022
  -1,205
  -1,339
  -1,479
  -1,627
  -1,781
  -1,941
  -2,108
  -2,282
  -2,463
  -2,651
  -2,847
  -3,050
  -3,261
  -3,480
  -3,708
  -3,946
  -4,193
  -4,450
  -4,718
  -4,997
  -5,288
  -5,592
  -5,909
  -6,240
  -6,586
  -6,948
  -7,325
  -7,721
  -8,134
  -8,567
Total debt, $m
  5,180
  6,560
  8,162
  9,843
  11,604
  13,443
  15,362
  17,360
  19,440
  21,602
  23,850
  26,186
  28,613
  31,136
  33,758
  36,485
  39,322
  42,274
  45,348
  48,551
  51,888
  55,368
  58,999
  62,788
  66,745
  70,879
  75,199
  79,716
  84,440
  89,382
  94,555
Total liabilities, $m
  13,019
  14,399
  16,001
  17,682
  19,443
  21,282
  23,201
  25,199
  27,279
  29,441
  31,689
  34,025
  36,452
  38,975
  41,597
  44,324
  47,161
  50,113
  53,187
  56,390
  59,727
  63,207
  66,838
  70,627
  74,584
  78,718
  83,038
  87,555
  92,279
  97,221
  102,394
Total equity, $m
  5,656
  1,600
  1,778
  1,965
  2,160
  2,365
  2,578
  2,800
  3,031
  3,271
  3,521
  3,781
  4,050
  4,331
  4,622
  4,925
  5,240
  5,568
  5,910
  6,266
  6,636
  7,023
  7,426
  7,847
  8,287
  8,746
  9,226
  9,728
  10,253
  10,802
  11,377
Total liabilities and equity, $m
  18,675
  15,999
  17,779
  19,647
  21,603
  23,647
  25,779
  27,999
  30,310
  32,712
  35,210
  37,806
  40,502
  43,306
  46,219
  49,249
  52,401
  55,681
  59,097
  62,656
  66,363
  70,230
  74,264
  78,474
  82,871
  87,464
  92,264
  97,283
  102,532
  108,023
  113,771
Debt-to-equity ratio
  0.916
  4.100
  4.590
  5.010
  5.370
  5.680
  5.960
  6.200
  6.410
  6.600
  6.770
  6.930
  7.060
  7.190
  7.300
  7.410
  7.500
  7.590
  7.670
  7.750
  7.820
  7.880
  7.940
  8.000
  8.050
  8.100
  8.150
  8.190
  8.240
  8.270
  8.310
Adjusted equity ratio
  -0.259
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4,059
  4,628
  5,195
  5,786
  6,405
  7,053
  7,728
  8,432
  9,164
  9,926
  10,719
  11,670
  12,527
  13,417
  14,342
  15,305
  16,308
  17,351
  18,438
  19,570
  20,751
  21,983
  23,269
  24,611
  26,013
  27,479
  29,011
  30,614
  32,291
  34,046
  35,884
Depreciation, amort., depletion, $m
  373
  339
  358
  377
  397
  418
  440
  462
  486
  511
  536
  387
  415
  443
  473
  504
  537
  570
  605
  642
  680
  719
  761
  804
  849
  896
  945
  996
  1,050
  1,106
  1,165
Funds from operations, $m
  3,617
  4,968
  5,552
  6,163
  6,802
  7,470
  8,168
  8,894
  9,650
  10,437
  11,255
  12,058
  12,941
  13,860
  14,816
  15,810
  16,844
  17,921
  19,043
  20,212
  21,431
  22,702
  24,029
  25,415
  26,862
  28,375
  29,956
  31,610
  33,341
  35,153
  37,049
Change in working capital, $m
  -867
  -127
  -134
  -141
  -147
  -154
  -161
  -167
  -174
  -181
  -188
  -195
  -203
  -211
  -219
  -228
  -237
  -247
  -257
  -268
  -279
  -291
  -304
  -317
  -331
  -346
  -361
  -378
  -395
  -414
  -433
Cash from operations, $m
  4,484
  5,095
  5,686
  6,303
  6,949
  7,624
  8,328
  9,061
  9,824
  10,618
  11,443
  12,253
  13,144
  14,071
  15,035
  16,038
  17,082
  18,168
  19,300
  20,480
  21,710
  22,993
  24,333
  25,732
  27,193
  28,721
  30,318
  31,988
  33,736
  35,566
  37,482
Maintenance CAPEX, $m
  0
  -147
  -164
  -182
  -201
  -221
  -242
  -264
  -287
  -310
  -335
  -361
  -387
  -415
  -443
  -473
  -504
  -537
  -570
  -605
  -642
  -680
  -719
  -761
  -804
  -849
  -896
  -945
  -996
  -1,050
  -1,106
New CAPEX, $m
  -382
  -172
  -182
  -191
  -200
  -209
  -218
  -227
  -237
  -246
  -256
  -266
  -276
  -287
  -298
  -310
  -323
  -336
  -350
  -364
  -380
  -396
  -413
  -431
  -450
  -470
  -492
  -514
  -538
  -562
  -589
Cash from investing activities, $m
  -1,167
  -319
  -346
  -373
  -401
  -430
  -460
  -491
  -524
  -556
  -591
  -627
  -663
  -702
  -741
  -783
  -827
  -873
  -920
  -969
  -1,022
  -1,076
  -1,132
  -1,192
  -1,254
  -1,319
  -1,388
  -1,459
  -1,534
  -1,612
  -1,695
Free cash flow, $m
  3,317
  4,776
  5,340
  5,930
  6,548
  7,194
  7,868
  8,570
  9,301
  10,061
  10,852
  11,627
  12,481
  13,370
  14,293
  15,254
  16,254
  17,296
  18,380
  19,510
  20,689
  21,918
  23,201
  24,540
  25,939
  27,402
  28,930
  30,530
  32,203
  33,954
  35,787
Issuance/(repayment) of debt, $m
  1,972
  1,380
  1,601
  1,681
  1,761
  1,840
  1,919
  1,998
  2,080
  2,162
  2,248
  2,336
  2,427
  2,523
  2,622
  2,727
  2,837
  2,952
  3,074
  3,202
  3,337
  3,480
  3,631
  3,789
  3,957
  4,134
  4,320
  4,517
  4,724
  4,942
  5,172
Issuance/(repurchase) of shares, $m
  -3,474
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -1,456
  1,380
  1,601
  1,681
  1,761
  1,840
  1,919
  1,998
  2,080
  2,162
  2,248
  2,336
  2,427
  2,523
  2,622
  2,727
  2,837
  2,952
  3,074
  3,202
  3,337
  3,480
  3,631
  3,789
  3,957
  4,134
  4,320
  4,517
  4,724
  4,942
  5,172
Total cash flow (excl. dividends), $m
  1,811
  6,157
  6,942
  7,611
  8,308
  9,033
  9,786
  10,568
  11,380
  12,224
  13,100
  13,962
  14,908
  15,892
  16,916
  17,981
  19,091
  20,248
  21,454
  22,712
  24,026
  25,398
  26,831
  28,329
  29,896
  31,535
  33,251
  35,046
  36,927
  38,896
  40,960
Retained Cash Flow (-), $m
  372
  -305
  -178
  -187
  -196
  -204
  -213
  -222
  -231
  -240
  -250
  -260
  -270
  -280
  -291
  -303
  -315
  -328
  -342
  -356
  -371
  -387
  -403
  -421
  -440
  -459
  -480
  -502
  -525
  -549
  -575
Prev. year cash balance distribution, $m
 
  4,361
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  10,213
  6,764
  7,425
  8,113
  8,829
  9,573
  10,346
  11,149
  11,984
  12,850
  13,703
  14,639
  15,612
  16,624
  17,678
  18,776
  19,920
  21,112
  22,357
  23,655
  25,011
  26,428
  27,908
  29,457
  31,076
  32,771
  34,544
  36,402
  38,347
  40,385
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  9,792
  6,192
  6,461
  6,680
  6,843
  6,948
  6,990
  6,969
  6,884
  6,737
  6,507
  6,247
  5,936
  5,581
  5,190
  4,771
  4,334
  3,888
  3,442
  3,006
  2,587
  2,193
  1,829
  1,500
  1,209
  956
  741
  563
  419
  304
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Mastercard Incorporated, a technology company, provides transaction processing and other payment-related products and services in the United States and internationally. It facilitates the processing of payment transactions, including authorization, clearing, and settlement, as well as delivers related products and services. The company also offers value-added services, such as loyalty and reward programs, information and consulting services, issuer and acquirer processing solutions, and payment and mobile gateways. In addition, it provides various payment products and solutions for cardholders, merchants, financial institutions, and governments; programs that enable issuers to provide consumers with cards to defer payments; payment products and solutions that allow its customers to access funds in deposit and other accounts; prepaid payment programs and management services; and commercial payment products and solutions. Further, the company provides products and services to prevent, detect, and respond to fraud and cyber-attacks, and ensure the safety of transactions. It offers payment solutions and services under the MasterCard, Maestro, and Cirrus brands. Mastercard Incorporated was founded in 1966 and is headquartered in Purchase, New York.

FINANCIAL RATIOS  of  Mastercard (MA)

Valuation Ratios
P/E Ratio 35.3
Price to Sales 13.3
Price to Book 25.3
Price to Tangible Book
Price to Cash Flow 31.9
Price to Free Cash Flow 34.9
Growth Rates
Sales Growth Rate 11.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 11.7%
Cap. Spend. - 3 Yr. Gr. Rate 5%
Financial Strength
Quick Ratio NaN
Current Ratio 0.3
LT Debt to Equity 91.6%
Total Debt to Equity 91.6%
Interest Coverage 77
Management Effectiveness
Return On Assets 23.5%
Ret/ On Assets - 3 Yr. Avg. 24.2%
Return On Total Capital 40.3%
Ret/ On T. Cap. - 3 Yr. Avg. 43.2%
Return On Equity 69.5%
Return On Equity - 3 Yr. Avg. 59.9%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 56.5%
EBITDA Margin - 3 Yr. Avg. 56.5%
Operating Margin 53.5%
Oper. Margin - 3 Yr. Avg. 53.4%
Pre-Tax Margin 52.4%
Pre-Tax Margin - 3 Yr. Avg. 52.5%
Net Profit Margin 37.7%
Net Profit Margin - 3 Yr. Avg. 38.5%
Effective Tax Rate 28.1%
Eff/ Tax Rate - 3 Yr. Avg. 26.7%
Payout Ratio 20.6%

MA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MA stock intrinsic value calculation we used $10776 million for the last fiscal year's total revenue generated by Mastercard. The default revenue input number comes from 2016 income statement of Mastercard. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our MA stock valuation model: a) initial revenue growth rate of 11.8% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for MA is calculated based on our internal credit rating of Mastercard, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Mastercard.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of MA stock the variable cost ratio is equal to 38.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $898 million in the base year in the intrinsic value calculation for MA stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Mastercard.

Corporate tax rate of 27% is the nominal tax rate for Mastercard. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the MA stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for MA are equal to 13.6%.

Life of production assets of 10 years is the average useful life of capital assets used in Mastercard operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for MA is equal to -10%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $5656 million for Mastercard - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 1076.84 million for Mastercard is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Mastercard at the current share price and the inputted number of shares is $142.5 billion.

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Stock chart of MA Financial statements of MA
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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