Mastercard’s (MA) long run in beating its peers in the S&P 500 came to an ending last year. The shares of the massive-cap payment processor only gained 0.7 percent in 2021, which was significantly lower than that of the index’s 26.9 percent gain. The positive news for the shareholders of Mastercard is that the stock appears likely to resume its previous highs in 2022. The stock has risen a little year-to-date and is higher than the decline of 5% that the index has seen in S&P 500.
What growth investors must be aware of about Mastercard for the year ahead.
The company actually reaps the benefits of inflation.
With the rate of inflation reaching an all-time high of 7.7% during December. It’s an understatement that inflation is the topic of discussion for economists and investors as well as consumers. Investors should be cognizant when they design their portfolios to ensure that they are able to withstand all economic conditions, including the most inflationary times.
It’s a good thing that Mastercard has been designed to perform particularly well as inflation increases due to both it’s business strategy and its fortress-like balance sheet. Mastercard earns income based on the amount of transactions as well as the number of transactions the company’s payment network processes for banks which issue cards.
Despite a rather high rate of inflation, U.S. consumers remained not swayed by their spending upon the latest month’s data, which was November 2021. Up to this date, U.S. consumer spending increased by 0.6 percent over the previous period. This means that a more manageable inflation rate and the consequent rise in the cost of services and goods are more likely to be positive effect than negative for the company’s profitability and revenue in the coming years. This is the reason why experts are forecasting 20 percent growth in the revenue of Mastercard this year, to $22.5 billion. This increased revenue will propel Mastercard’s GAAP non-GAAP (adjusted) earning per share (EPS) to $10.51 which is an increase of 27.
In the balance sheet portion of the equation Mastercard isn’t affected by the a series of interest rate hikes which the Federal Reserve is planning this year to control inflation. The reason is that Mastercard’s net credit is just $6.9 billion ($13.9 billion of long-term debt less $6.9 billion in investments and cash). Mastercard can rapidly settle any variable rate debts in the event that interest rates rise rapidly. This is due to the fact that the company generated $10.8 billion earnings after taxes, interest depreciation and amortization (EBITDA) during the past twelve months.
Headwinds from COVID-19 could be a problem, but they are less threatening.
Although COVID-19 did have an impact on the recovery of the economy in 2021, it was not enough to prevent the world economy from expanding by around 5.5 percent by 2020, as per the World Bank. With COVID-19-related interruptions of economic activity expected to continue in 2022. Vaccines and antiviral medications that are available from companies like Pfizer (PFE) can assist in reducing the impact of the omicron-related variant over the entire year. Thus it is it is expected that the World Bank anticipates that global economic growth will slow to 4.1 percent, by 2022.
This could also serve as an impetus to propel the earnings and revenue of Mastercard to a higher level in 2022.
Purchase Mastercard prior to the time it’s gone
Mastercard seems to be in a position to provide another year of exceptional earnings and revenue growth. In conjunction with the reasonable price for a company of its good quality, this could be the start of a fantastic 2022. What’s the reason I believe that Mastercard is an attractive price for investors looking to grow?
The stock is trading at an estimated 2022 earnings ratio of 35. Although this might sound like a high number however, experts are forecasting that the growth in earnings will increase from 22% per year in the past five years , to 26% per year in the five years to come. If you take Mastercard’s long-term tailwinds as well as its strong balance sheet it is an arguably reasonable price for the stock. This also shows the reason why Mastercard’s current price of $361 per share could yield investors a profit of 19%, which is based on the median analyst goal of $430 for the year.
In addition, there’s the savings account’s 0.5 percent dividend yield on shares as well, as well. The commodity provides a great Mastercard stock forecast and is one a growth investor shouldn’t not take advantage of in 2022.
The small-cap stock of high-quality and top-quality that is slipping under the radar of the City.
Investors who are savvy and adventurous like you will not want to miss the chance to take advantage of an amazing chance…
It is evident that over the last three years, this listed company on AIM has been quietly advancing… giving shareholders with a generous increase in share prices thanks to a well-planned “buy and build” strategy.
and a top-quality management team at its helm with a tested and well-executed business plan and market-leading positions in niche, high-margin items… the analysts at our firm believe that there is growth potential to come up.
