Shares of MasterCard (MA) have been strong performers lately, with the stock up 0.9% over the past month. The stock hit a new 52-week high of $429.47 in the previous session. MasterCard has gained 0.4% since the start of the year compared to the 20.6% move for the Zacks Business Services sector and the 22.9% return for the Zacks Financial Transaction Services industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on October 26, 2023, MasterCard reported EPS of $3.39 versus consensus estimate of $3.21.
For the current fiscal year, MasterCard is expected to post earnings of $14.18 per share on $25 billion in revenues. Meanwhile, for the next fiscal year, the company is expected to earn $16.77 per share on $28.09 billion in revenues. This represents a year-over-year change of 16.62% and 12.34%, respectively.
MasterCard may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
MasterCard has a Value Score of C. The stock's Growth and Momentum Scores are B and B, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 30.2X current fiscal year EPS estimates, which is a premium to the peer industry average of 12.5X. On a trailing cash flow basis, the stock currently trades at 32.3X versus its peer group's average of 10.5X. Additionally, the stock has a PEG ratio of 1.67. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, MasterCard currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if MasterCard passes the test. Thus, it seems as though MasterCard shares could have a bit more room to run in the near term.
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