Mastercard (MA) Margin Miss Reinforces Valuation Concerns Versus Bullish Growth Narratives

Mastercard (MA) posted net profit margins of 44.9%, down from last year’s 46.4%. While earnings have grown at a robust 15% per year over the past five years, the most recent year’s growth of 10.8% came in below that average. Looking ahead, revenue is forecast to grow at 10.1% annually and EPS at 11.1% per year, which trails the broader US market’s projected EPS growth of 15.9%. Despite high quality earnings and a favorable view based on discounted cash flow valuation, the company commands a hefty Price-to-Earnings ratio of 36.8x, topping both industry and peer group averages.

See our full analysis for Mastercard.

The next section puts Mastercard’s latest numbers to the test by measuring them against the most widely followed market narratives. This will highlight which stories hold up in light of the new results.

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Buybacks Shrink Share Count While Supporting EPS Growth

• Mastercard repurchased $3.3 billion of shares in the latest quarter, and analysts expect the company will continue to reduce its shares outstanding by 1.51% per year over the next three years. This reduction directly impacts future EPS figures and capital returns.
• According to the analysts' consensus view, consistent share buybacks and disciplined capital allocation drive higher EPS and reinforce Mastercard’s margin expansion story, especially when paired with investments in value-added services.
  • Consensus narrative notes that reducing the share count has helped support reported EPS growth, even as top line revenue and margin expansion face moderating momentum compared to previous years.
  • This approach helps counter the effect of slowing earnings growth. The latest annual increase of 10.8% is below the prior five-year average of 15% per year.
• See why analysts connect Mastercard’s shrinking share base to stronger future EPS in the consensus narrative: 📊 Read the full Mastercard Consensus Narrative.

Profit Margins Expected to Rebound After Dip

• Profit margins currently stand at 44.9%, below last year’s 46.4%. Analysts project a rebound to 46.8% within three years, signaling renewed margin expansion despite the recent dip.
• Per the analysts' consensus view, ongoing global expansion and digital partnerships should drive transaction growth and recurring fee-based revenue, supporting the case for higher long-term profitability.
  • Initiatives in areas like cybersecurity and data analytics are specifically highlighted as margin drivers that could accelerate improvement beyond current levels.
  • This expectation of rising margins directly addresses concerns about margin compression, suggesting the recent decrease is likely temporary as business mix continues to shift.

Valuation Sits at a Premium Amid Slower Growth

• Mastercard’s Price-to-Earnings ratio remains high at 36.8x, well above both the industry average (14.8x) and peer group (17.5x), highlighting its status as a premium-valued stock despite slower forecasted growth rates for revenue and EPS.
• Reviewing the analysts' consensus, there is clear tension between the company’s perceived quality and its rich valuation. Consensus notes that for today’s share price of $553.68 to reach the analyst target of $651.81, revenue growth must hit 12.1% per year and profit margins must rebound as forecast. Otherwise, the current valuation may be difficult to justify.
  • This lens puts pressure on the business to outperform in high-growth and high-margin segments. Even small disappointments versus these optimistic assumptions risk weighing on valuation multiples.
  • The premium multiple also limits room for upward price revision, especially since projected EPS growth (11.1% per year) trails the broader US market’s 15.9% expectation.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Mastercard on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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A great starting point for your Mastercard research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

See What Else Is Out There

While Mastercard commands a premium valuation, its earnings and revenue growth are slowing, and they must accelerate to justify the share price.

To focus on companies that offer more attractive valuations and upside, check out these 848 undervalued stocks based on cash flows and see where the real value may be hiding right now.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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