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MasterCard's Growth Prospects Look Solid: Time to Buy?

CODI MA VNTV PYPL

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On Nov 18, 2016, we issued an updated research report on MasterCard Inc. (MA - Free Report) . The Purchase, NY-based payment processing giant continues to depict strength in several areas, including a solid revenue growth momentum.

Net revenue increased 12% year-over-year to $8.0 billion for the nine months ended Sep 2016, driven by higher processed transactions, increased cross-border volumes and gross dollar volume. The company remains well poised for growth given its strong market position, solid global brand recognition and the current broader trend of shift towards electronic payments from paper-based forms.

Further, the company remains focused on opportunities through strategic acquisitions and alliances. In an effort to support its mobile-payments initiative and boost online payments volume, in Sep 2016, MasterCard expanded its partnership with PayPal Holdings, Inc. (PYPL - Free Report) . Further, in Jul 2016, MasterCard inked a deal to acquire 92.4% of London-based Vocalink Holdings Limited which operates major payments technology platforms for the U.K. payment schemes. This acquisition is expected to be closed in mid-2017.

However, escalating costs continue to limit the company’s profitability. During the nine months ended Sep 2016, total operating expenses increased 14% (or 16% on a currency-neutral basis) from the prior-year period. The rise was mainly due to continued investments tied with digital initiatives, data analytics and geographic expansion, as well as higher legal costs.

For 2016, management expects total operating expense to increase in the low double-digit range, excluding special items. On a currency neutral basis, it continues to expect a low double-digit increase. Nevertheless, it expects positive operating leverage for the year.

Shares of MasterCard have gained more than 10% over the past three months.

 

MASTERCARD INC Price

 

MASTERCARD INC Price | MASTERCARD INC Quote

Over the past 30 days, the Zacks Consensus Estimate has moved north 2.7% to $3.75 per share for 2016 and 2.1% to $4.31 per share for 2017.

MasterCard currently carries a Zacks Rank #2 (Buy).

Other Stocks to Consider

Compass Diversified Holdings LLC (CODI - Free Report) : The Zacks Consensus Estimate for 2016 has moved up 1.4% to $1.43 per share for 2016 and 1.7% to $1.78 per share for 2017, over the last 30 days. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Vantiv, Inc. (VNTV - Free Report) : Over the last 30 days, the Zacks Consensus Estimate for the current year has increased 1.2% to $2.57 per share and edged up 1% to $2.93 per share for 2017. The company carries a Zacks Rank #2.

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