Intrinsic value of Mastercard - MA

Previous Close

$151.93

  Intrinsic Value

$132.19

stock screener

  Rating & Target

hold

-13%

Previous close

$151.93

 
Intrinsic value

$132.19

 
Up/down potential

-13%

 
Rating

hold

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 161.8

 

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
  13.30
  12.47
  11.72
  11.05
  10.45
  9.90
  9.41
  8.97
  8.57
  8.22
  7.89
  7.60
  7.34
  7.11
  6.90
  6.71
  6.54
  6.38
  6.25
  6.12
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.43
  5.39
Revenue, $m
  10,776
  12,209
  13,732
  15,341
  17,037
  18,816
  20,679
  22,626
  24,655
  26,769
  28,968
  31,255
  33,631
  36,101
  38,668
  41,336
  44,109
  46,993
  49,993
  53,115
  56,367
  59,754
  63,284
  66,966
  70,806
  74,816
  79,002
  83,376
  87,947
  92,726
  97,725
Variable operating expenses, $m
 
  4,665
  5,225
  5,817
  6,440
  7,094
  7,780
  8,495
  9,241
  10,019
  10,827
  11,492
  12,366
  13,275
  14,218
  15,199
  16,219
  17,279
  18,383
  19,531
  20,726
  21,972
  23,270
  24,624
  26,036
  27,510
  29,049
  30,658
  32,339
  34,096
  35,934
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
  5,585
  6,168
  6,784
  7,431
  8,110
  8,821
  9,562
  10,335
  11,140
  11,977
  12,670
  13,574
  14,513
  15,487
  16,500
  17,552
  18,645
  19,784
  20,967
  22,197
  23,480
  24,816
  26,209
  27,660
  29,175
  30,755
  32,407
  34,132
  35,934
  37,818
Operating income, $m
  5,761
  6,624
  7,563
  8,558
  9,605
  10,706
  11,859
  13,063
  14,320
  15,629
  16,991
  18,584
  20,057
  21,589
  23,181
  24,836
  26,557
  28,347
  30,210
  32,149
  34,169
  36,274
  38,468
  40,757
  43,146
  45,641
  48,246
  50,969
  53,816
  56,793
  59,908
EBITDA, $m
  6,134
  6,988
  7,951
  8,970
  10,044
  11,172
  12,354
  13,588
  14,876
  16,218
  17,614
  19,067
  20,577
  22,147
  23,778
  25,475
  27,238
  29,073
  30,982
  32,970
  35,040
  37,197
  39,446
  41,792
  44,241
  46,797
  49,467
  52,258
  55,175
  58,226
  61,418
Interest expense (income), $m
  74
  181
  95
  141
  189
  241
  294
  351
  410
  471
  535
  601
  670
  742
  817
  895
  975
  1,059
  1,146
  1,237
  1,331
  1,430
  1,532
  1,639
  1,750
  1,866
  1,987
  2,114
  2,246
  2,384
  2,529
Earnings before tax, $m
  5,646
  6,442
  7,469
  8,417
  9,416
  10,465
  11,564
  12,712
  13,910
  15,158
  16,456
  17,983
  19,387
  20,847
  22,364
  23,941
  25,582
  27,288
  29,063
  30,912
  32,838
  34,844
  36,936
  39,119
  41,396
  43,775
  46,259
  48,855
  51,570
  54,409
  57,379
Tax expense, $m
  1,587
  1,739
  2,017
  2,273
  2,542
  2,826
  3,122
  3,432
  3,756
  4,093
  4,443
  4,855
  5,234
  5,629
  6,038
  6,464
  6,907
  7,368
  7,847
  8,346
  8,866
  9,408
  9,973
  10,562
  11,177
  11,819
  12,490
  13,191
  13,924
  14,690
  15,492
Net income, $m
  4,059
  4,703
  5,452
  6,144
  6,874
  7,640
  8,442
  9,280
  10,154
  11,065
  12,013
  13,127
  14,152
  15,218
  16,326
  17,477
  18,675
  19,920
  21,216
  22,566
  23,971
  25,436
  26,963
  28,557
  30,219
  31,955
  33,769
  35,664
  37,646
  39,718
  41,887

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
  11,717
  13,178
  14,723
  16,350
  18,058
  19,846
  21,714
  23,661
  25,690
  27,800
  29,995
  32,276
  34,646
  37,109
  39,670
  42,331
  45,099
  47,978
  50,974
  54,095
  57,345
  60,733
  64,266
  67,952
  71,800
  75,818
  80,015
  84,402
  88,989
  93,786
Adjusted assets (=assets-cash), $m
  10,340
  11,717
  13,178
  14,723
  16,350
  18,058
  19,846
  21,714
  23,661
  25,690
  27,800
  29,995
  32,276
  34,646
  37,109
  39,670
  42,331
  45,099
  47,978
  50,974
  54,095
  57,345
  60,733
  64,266
  67,952
  71,800
  75,818
  80,015
  84,402
  88,989
  93,786
Revenue / Adjusted assets
  1.042
  1.042
  1.042
  1.042
  1.042
  1.042
  1.042
  1.042
  1.042
  1.042
  1.042
  1.042
  1.042
  1.042
  1.042
  1.042
  1.042
  1.042
  1.042
  1.042
  1.042
  1.042
  1.042
  1.042
  1.042
  1.042
  1.042
  1.042
  1.042
  1.042
  1.042
Average production assets, $m
  1,467
  1,660
  1,868
  2,086
  2,317
  2,559
  2,812
  3,077
  3,353
  3,641
  3,940
  4,251
  4,574
  4,910
  5,259
  5,622
  5,999
  6,391
  6,799
  7,224
  7,666
  8,127
  8,607
  9,107
  9,630
  10,175
  10,744
  11,339
  11,961
  12,611
  13,291
Working capital, $m
  6,022
  -2,625
  -2,952
  -3,298
  -3,663
  -4,046
  -4,446
  -4,864
  -5,301
  -5,755
  -6,228
  -6,720
  -7,231
  -7,762
  -8,314
  -8,887
  -9,483
  -10,103
  -10,748
  -11,420
  -12,119
  -12,847
  -13,606
  -14,398
  -15,223
  -16,085
  -16,985
  -17,926
  -18,909
  -19,936
  -21,011
Total debt, $m
  5,180
  2,706
  4,021
  5,412
  6,876
  8,413
  10,022
  11,703
  13,456
  15,282
  17,181
  19,156
  21,209
  23,343
  25,560
  27,864
  30,259
  32,750
  35,341
  38,038
  40,846
  43,772
  46,821
  50,001
  53,318
  56,781
  60,397
  64,175
  68,123
  72,251
  76,569
Total liabilities, $m
  13,019
  10,545
  11,860
  13,251
  14,715
  16,252
  17,861
  19,542
  21,295
  23,121
  25,020
  26,995
  29,048
  31,182
  33,399
  35,703
  38,098
  40,589
  43,180
  45,877
  48,685
  51,611
  54,660
  57,840
  61,157
  64,620
  68,236
  72,014
  75,962
  80,090
  84,408
Total equity, $m
  5,656
  1,172
  1,318
  1,472
  1,635
  1,806
  1,985
  2,171
  2,366
  2,569
  2,780
  2,999
  3,228
  3,465
  3,711
  3,967
  4,233
  4,510
  4,798
  5,097
  5,409
  5,735
  6,073
  6,427
  6,795
  7,180
  7,582
  8,002
  8,440
  8,899
  9,379
Total liabilities and equity, $m
  18,675
  11,717
  13,178
  14,723
  16,350
  18,058
  19,846
  21,713
  23,661
  25,690
  27,800
  29,994
  32,276
  34,647
  37,110
  39,670
  42,331
  45,099
  47,978
  50,974
  54,094
  57,346
  60,733
  64,267
  67,952
  71,800
  75,818
  80,016
  84,402
  88,989
  93,787
Debt-to-equity ratio
  0.916
  2.310
  3.050
  3.680
  4.210
  4.660
  5.050
  5.390
  5.690
  5.950
  6.180
  6.390
  6.570
  6.740
  6.890
  7.020
  7.150
  7.260
  7.370
  7.460
  7.550
  7.630
  7.710
  7.780
  7.850
  7.910
  7.970
  8.020
  8.070
  8.120
  8.160
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
  4,703
  5,452
  6,144
  6,874
  7,640
  8,442
  9,280
  10,154
  11,065
  12,013
  13,127
  14,152
  15,218
  16,326
  17,477
  18,675
  19,920
  21,216
  22,566
  23,971
  25,436
  26,963
  28,557
  30,219
  31,955
  33,769
  35,664
  37,646
  39,718
  41,887
Depreciation, amort., depletion, $m
  373
  364
  388
  413
  439
  466
  495
  525
  557
  589
  623
  483
  520
  558
  598
  639
  682
  726
  773
  821
  871
  923
  978
  1,035
  1,094
  1,156
  1,221
  1,289
  1,359
  1,433
  1,510
Funds from operations, $m
  3,600
  5,067
  5,840
  6,557
  7,313
  8,106
  8,937
  9,805
  10,711
  11,654
  12,636
  13,610
  14,672
  15,776
  16,923
  18,116
  19,356
  20,646
  21,989
  23,387
  24,843
  26,360
  27,941
  29,592
  31,314
  33,112
  34,990
  36,953
  39,005
  41,151
  43,397
Change in working capital, $m
  -884
  -308
  -327
  -346
  -364
  -383
  -401
  -418
  -436
  -454
  -473
  -492
  -511
  -531
  -552
  -574
  -596
  -620
  -645
  -671
  -699
  -728
  -759
  -792
  -826
  -862
  -900
  -940
  -983
  -1,028
  -1,075
Cash from operations, $m
  4,484
  5,375
  6,167
  6,903
  7,677
  8,489
  9,337
  10,224
  11,147
  12,109
  13,109
  14,102
  15,183
  16,307
  17,475
  18,689
  19,952
  21,266
  22,634
  24,058
  25,542
  27,088
  28,701
  30,383
  32,139
  33,974
  35,890
  37,893
  39,988
  42,179
  44,472
Maintenance CAPEX, $m
  0
  -167
  -189
  -212
  -237
  -263
  -291
  -320
  -350
  -381
  -414
  -448
  -483
  -520
  -558
  -598
  -639
  -682
  -726
  -773
  -821
  -871
  -923
  -978
  -1,035
  -1,094
  -1,156
  -1,221
  -1,289
  -1,359
  -1,433
New CAPEX, $m
  -382
  -194
  -207
  -219
  -231
  -242
  -253
  -265
  -276
  -287
  -299
  -311
  -323
  -336
  -349
  -363
  -377
  -392
  -408
  -425
  -442
  -461
  -480
  -501
  -522
  -545
  -569
  -595
  -622
  -650
  -680
Cash from investing activities, $m
  -1,167
  -361
  -396
  -431
  -468
  -505
  -544
  -585
  -626
  -668
  -713
  -759
  -806
  -856
  -907
  -961
  -1,016
  -1,074
  -1,134
  -1,198
  -1,263
  -1,332
  -1,403
  -1,479
  -1,557
  -1,639
  -1,725
  -1,816
  -1,911
  -2,009
  -2,113
Free cash flow, $m
  3,317
  5,015
  5,772
  6,472
  7,209
  7,983
  8,793
  9,639
  10,522
  11,440
  12,396
  13,343
  14,377
  15,451
  16,568
  17,729
  18,936
  20,192
  21,500
  22,861
  24,278
  25,756
  27,297
  28,904
  30,582
  32,334
  34,164
  36,077
  38,078
  40,170
  42,359
Issuance/(repayment) of debt, $m
  1,972
  -2,474
  1,315
  1,390
  1,464
  1,537
  1,609
  1,681
  1,753
  1,826
  1,900
  1,975
  2,053
  2,133
  2,217
  2,304
  2,395
  2,491
  2,591
  2,697
  2,808
  2,926
  3,049
  3,180
  3,317
  3,463
  3,616
  3,778
  3,948
  4,128
  4,318
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
  -2,474
  1,315
  1,390
  1,464
  1,537
  1,609
  1,681
  1,753
  1,826
  1,900
  1,975
  2,053
  2,133
  2,217
  2,304
  2,395
  2,491
  2,591
  2,697
  2,808
  2,926
  3,049
  3,180
  3,317
  3,463
  3,616
  3,778
  3,948
  4,128
  4,318
Total cash flow (excl. dividends), $m
  1,811
  2,541
  7,087
  7,862
  8,674
  9,520
  10,402
  11,320
  12,274
  13,266
  14,296
  15,318
  16,430
  17,585
  18,785
  20,033
  21,332
  22,683
  24,091
  25,558
  27,087
  28,682
  30,346
  32,084
  33,900
  35,797
  37,780
  39,855
  42,026
  44,298
  46,676
Retained Cash Flow (-), $m
  372
  -3,851
  -146
  -154
  -163
  -171
  -179
  -187
  -195
  -203
  -211
  -219
  -228
  -237
  -246
  -256
  -266
  -277
  -288
  -300
  -312
  -325
  -339
  -353
  -369
  -385
  -402
  -420
  -439
  -459
  -480
Prev. year cash balance distribution, $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
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
 
  7,026
  6,940
  7,708
  8,511
  9,350
  10,224
  11,133
  12,080
  13,063
  14,085
  15,099
  16,202
  17,348
  18,539
  19,777
  21,066
  22,407
  23,803
  25,258
  26,775
  28,357
  30,007
  31,731
  33,531
  35,412
  37,379
  39,435
  41,587
  43,839
  46,197
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
 
  6,736
  6,354
  6,708
  7,008
  7,247
  7,420
  7,522
  7,550
  7,504
  7,384
  7,170
  6,914
  6,596
  6,224
  5,806
  5,353
  4,875
  4,384
  3,889
  3,402
  2,933
  2,490
  2,080
  1,708
  1,378
  1,091
  846
  643
  479
  348
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 is a technology company that connects consumers, financial institutions, merchants, governments and businesses across the world, enabling them to use electronic forms of payment. The Company operates through Payment Solutions segment. The Company allows user to make payments by creating a range of payment solutions and services using its brands, which include MasterCard, Maestro and Cirrus. The Company provides a range of products and solutions that support payment products, which customers can offer to their cardholders. The Company's services facilitate transactions on its network among cardholders, merchants, financial institutions and governments. The Company's products include consumer credit and charge, commercial, debit, prepaid, commercial and digital. The Company's consumer credit and charge offers a range of programs that enables issuers to provide consumers with cards allowing users to defer payment.

FINANCIAL RATIOS  of  Mastercard (MA)

Valuation Ratios
P/E Ratio 40.5
Price to Sales 15.2
Price to Book 29
Price to Tangible Book
Price to Cash Flow 36.6
Price to Free Cash Flow 40
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 13.3% 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 8.8 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 -21.5%. 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 1064.86 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 $161.8 billion.

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COMPANY NEWS

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▶ Analysts Love Mastercard...Here's the One Exception   [Nov-14-17 05:00PM  Barrons.com]
▶ Understanding Mastercards Higher Valuations   [07:31AM  Market Realist]
▶ Analyzing Mastercards Gross Dollar Volumes   [09:01AM  Market Realist]
▶ Behind Mastercards Total Operating Expenses   [07:32AM  Market Realist]
▶ Is It Time To Buy Mastercard Incorporated (MA)?   [Nov-10-17 02:35PM  Simply Wall St.]
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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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