Market Capitalization $107.7 Billion

Transcription

1 BUY HOLD SELL A+ A A- B+ B B- C+ C C- D+ D D- E+ E E- F Annual Dividend Rate BUY BUY RATING SINCE 09/08/2009 TARGET PRICE $ BUSINESS DESCRIPTION MasterCard Incorporated, a technology company, provides transaction processing and other payment-related products and services in the United States and internationally. STOCK PERFORNCE (%) 3 Mo. 1 Yr. 3 Yr (Ann) Price Change GROWTH (%) Last Qtr 12 Mo. 3 Yr CAGR Revenues Net Income EPS RETURN ON EQUITY (%) Ind Avg S&P 500 Q Q Q P/E COMPARISON Sector: Technology Sub-Industry: Data Processing & Outsourced Services Source: S&P Weekly Price: (US$) S (50) S (100) 1 Year 2 Years Rating History BUY Volume in Millions COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History TARGET PRICE $ EPS ANALYSIS¹ ($) Ind Avg S&P 500 RECOMMENDATION We rate () a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, growth in earnings per share and increase in net income. We feel its strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value. HIGHLIGHTS The revenue growth came in higher than the industry average of 5.8%. Since the same quarter one year prior, revenues rose by 12.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share. The current debt-to-equity ratio, 0.57, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.42, which illustrates the ability to avoid short-term cash problems. Q Q Q Q Q Q Q NA = not available NM = not meaningful Q Q Q Compustat fiscal year convention is used for all fundamental data items. Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the IT Services industry and the overall market, 's return on equity significantly exceeds that of both the industry average and the S&P 500. has improved earnings per share by 9.9% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, STERCARD INC increased its bottom line by earning $3.35 versus $3.09 in the prior year. This year, the market expects an improvement in earnings ($3.63 versus $3.35). The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the IT Services industry average. The net income increased by 6.7% when compared to the same quarter one year prior, going from $ million to $ million. PAGE 1

2 PEER GROUP ANALYSIS REVENUE GROWTH AND EBITDA RGIN* Revenue Growth (TTM) -50% 350% ADP UNFAVORABLE 10% PYPL FIS GPN ADS WU FISV EBITDA Margin (TTM) PAYX FAVORABLE FLT V 80% Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $10.4 Billion and $156.5 Billion. Companies with NA or NM values do not appear. *EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization. REVENUE GROWTH AND EARNINGS YIELD Revenue Growth (TTM) -50% 350% UNFAVORABLE FIS 1% PYPL FLT GPN V PAYX ADS FISV ADP Earnings Yield (TTM) FAVORABLE WU Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between -1.9% and 335.7%. Companies with NA or NM values do not appear. 8% INDUSTRY ANALYSIS The US IT Services industry includes companies that provide IT-related services, such as consulting, installation, systems integration, software development, and support. It includes providers of commercial electronic data processing and business process outsourcing (BPO) services, including back-office operations. There are about 35,000 such U.S. companies in this space. Major players are Accenture (ACN), Computer Sciences (CSC), and the technology consulting arms of International Business Machines (IBM) and Xerox (XRX). The industry is highly competitive, mature, and characterized by rapid technological changes, evolving industry standards, and changing customer preferences. Companies compete on service quality, product performance, technological innovation, and pricing. Demand is affected by the IT spending budget of clients, which in turn, is affected by the level of economic activity in the industries and markets they serve. IT spending has shifted from hardware to software and services. The emergence of business process outsourcing has altered the competitive landscape within the industry by making high quality services available at reduced costs. The 50 largest companies hold more than 80% of the market. Industry players use outsourcing as a tool to drive revenue growth by expanding service offerings that are costly to develop and deliver internally. Consolidation is on the rise as large companies strive to expand their geographical foot-print and service portfolio. The economic may add to IT spending in the coming quarters and spurring the growth of existing and new business. Another major challenge is anti-outsourcing as part of immigration reform legislation under discussion in Congress, aimed at limiting or restricting outsourcing to address unemployment concerns in the US. Certain instances of theft and misappropriation of sensitive client information have marred growth. The outlook for the IT services industry remains positive as spending on technology products and services is expected to grow, albeit at a slower rate in the immediate future. However, companies sustainability in an intense competitive environment will depend on their ability to fulfill demand in a cost-competitive and efficient manner. PEER GROUP: IT Services Recent Market Price/ Net Sales Net Income Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M) , , , PYPL PAYPAL HOLDINGS INC , , , ADP AUTOTIC DATA PROCESSING , , , FIS FIDELITY NATIONAL INFO SVCS , , FISV FISERV INC , , PAYX PAYCHEX INC , , V VISA INC , , , FLT FLEETCOR TECHNOLOGIES INC , , ADS ALLIANCE DATA SYSTEMS CORP , , GPN GLOBAL PAYMENTS INC , , WU WESTERN UNION CO , , The peer group comparison is based on Major Data Processing & Outsourced Services companies of comparable size. PAGE 2

3 Annual Dividend Rate COMPANY DESCRIPTION MasterCard Incorporated, a technology company, provides transaction processing and other payment-related products and services in the United States and internationally. It facilitates the processing of payment transactions, including authorization, clearing, and settlement, as well as delivers related products and services. The company also offers value-added services, such as loyalty and reward programs, and information and consulting services. In addition, it provides cross-border and domestic processing services; and issuer and acquirer processing solutions, and payment and mobile gateways. Further, the company offers various payment products and solutions for cardholders, merchants, financial institutions, and governments; programs that enable issuers to provide consumers with cards to defer payments; payment products and solutions that allow its customers to access funds in deposit and other accounts; prepaid payment programs and management services; and commercial payment products and solutions. Additionally, it provides products and services to prevent, detect, and respond to fraud and ensure the safety of transactions. The company offers payment solutions and services under the MasterCard, Maestro, and Cirrus brands. MasterCard Incorporated was founded in 1966 and is headquartered in Purchase, New York Purchase Street Purchase, NY USA Phone: STOCK-AT-A-GLANCE Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and nesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock s valuation. Please refer to our Valuation section on page 5 for further information. FACTOR SCORE Growth 5.0 out of 5 stars Measures the growth of both the company's income statement and cash flow. On this factor, has a growth score better than 90% of the stocks we rate. Total Return 4.5 out of 5 stars Measures the historical price movement of the stock. The stock performance of this company has beaten 80% of the companies we cover. Efficiency 5.0 out of 5 stars Measures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 90% of the companies we review. Price volatility 5.0 out of 5 stars Measures the volatility of the company's stock price historically. The stock is less volatile than 90% of the stocks we monitor. Solvency 5.0 out of 5 stars Measures the solvency of the company based on several ratios. The company is more solvent than 90% of the companies we analyze. Income 3.0 out of 5 stars Measures dividend yield and payouts to shareholders. The company's dividend is higher than 50% of the companies we track. THESTREET RATINGS RESEARCH METHODOLOGY TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. PAGE 3

4 Consensus EPS Estimates² ($) IBES consensus estimates are provided by Thomson Financial FINANCIAL ANALYSIS 's gross profit margin for the second quarter of its fiscal year 2016 is essentially unchanged when compared to the same period a year ago. The company managed to grow both sales and net income at a faster pace than the average competitor in its industry this quarter as compared to the same quarter a year ago. has average liquidity. Currently, the Quick Ratio is 1.42 which shows that technically this company has the ability to cover short-term cash needs. The company's liquidity has increased from the same period last year, indicating improving cash flow Q3 FY E 2016(E) 4.20 E 2017(E) During the same period, stockholders' equity ("net worth") has decreased by 8.85% from the same quarter last year. Together, the key liquidity measurements indicate that it is relatively unlikely that the company will face financial difficulties in the near future. INCOME STATEMENT Net Sales ($mil) 2, , EBITDA ($mil) 1, , EBIT ($mil) 1, , Net Income ($mil) STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit BALANCE SHEET Cash & Equiv. ($mil) 6, , Total Assets ($mil) 16, , Total Debt ($mil) 3, , Equity ($mil) 5, , PROFITABILITY Gross Profit Margin 58.65% 58.74% EBITDA Margin 58.64% 58.74% Operating Margin 55.20% 54.90% Sales Turnover Return on Assets 23.39% 24.60% Return on Equity 65.25% 58.66% DEBT Current Ratio Debt/Capital Interest Expense Interest Coverage SHARE DATA Shares outstanding (mil) 1,098 1,134 Div / share EPS Book value / share Institutional Own % NA NA Avg Daily Volume 4,205,879 3,424,021 2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates. PAGE 4

5 RATINGS HISTORY Our rating for has not changed since 7/31/2009. As of 9/8/2016, the stock was trading at a price of which is 1.8% below its 52-week high of $ and 27.3% above its 52-week low of $ Year Chart BUY: $ $110 $100 $90 $80 MOST RECENT RATINGS CHANGES Date Price Action From To 9/8/14 $76.23 No Change Buy Buy Price reflects the closing price as of the date listed, if available RATINGS DEFINITIONS & DISTRIBUTION OF THESTREET RATINGS (as of 9/8/2016) 40.92% Buy - We believe that this stock has the opportunity to appreciate and produce a total return of more than 10% over the next 12 months % Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss % Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns. TheStreet Ratings 14 Wall Street, 15th Floor New York, NY Research Contact: Sales Contact: VALUATION BUY. 's P/E ratio indicates a premium compared to an average of for the IT Services industry and a premium compared to the S&P 500 average of For additional comparison, its price-to-book ratio of indicates a significant premium versus the S&P 500 average of 2.83 and a significant premium versus the industry average of The price-to-sales ratio is well above both the S&P 500 average and the industry average, indicating a premium. Upon assessment of these and other key valuation criteria, proves to trade at a premium to investment alternatives within the industry. Price/Earnings Peers Average. An average P/E ratio can signify an industry neutral price for a stock and an average growth expectation. is trading at a valuation on par with its peers. Price/Projected Earnings Peers Premium. A higher price-to-projected earnings ratio than its peers can signify a more expensive stock or higher future growth expectations. is trading at a significant premium to its peers. Price/Book Peers 8.06 Premium. A higher price-to-book ratio makes a stock less attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet. is trading at a significant premium to its peers. Price/Sales Peers 5.50 Premium. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. is trading at a significant premium to its industry. DISCLAIMER: Price/CashFlow Peers Premium. The P/CF ratio, a stock s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures. is trading at a premium to its peers. Price to Earnings/Growth 3.59 Peers 2.40 Premium. The PEG ratio is the stock s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples. trades at a significant premium to its peers. Earnings Growth lower higher 4.29 Peers Lower. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios. However, is expected to significantly trail its peers on the basis of its earnings growth rate. Sales Growth lower higher 6.99 Peers Lower. A sales growth rate that trails the industry implies that a company is losing market share. significantly trails its peers on the basis of sales growth The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided via the COMPUSTAT Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as other third-party data providers. TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional, before you make any investment. None of the information contained in this report constitutes, or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at PAGE 5