Overview of Mastercard Incorporated & Intrinsic Value calculation
Mastercard https://www.mastercard.com/global/en/personal/find-card-products/click-to-pay.html is a technology company in the global payments industry. Mastercard connect consumers, financial institutions, merchants, governments, digital partners, businesses and other organizations worldwide by enabling electronic payments and making those payment transactions safe, simple, smart and accessible. Mastercard make payments easier and more efficient by providing a wide range of payment solutions and services using of well-known and trusted brands, including Mastercard , Maestro and Cirrus . Mastercard handling additional payments capabilities that include automated clearing house ( ACH ) transactions (both batch and real-time account-based payments).
FCFE Details of Mastercard Incorporated shown below, US$ in millions, except per share data
|
Year |
Value |
FCFE or Terminal Value |
Present Value at 14.7% |
|
0 |
FCFE0 |
13,639 |
13,639 |
|
1 |
FCFE1 |
14,798 |
11,891 |
|
2 |
FCFE2 |
16,498 |
11,248 |
|
3 |
FCFE3 |
18,148 |
10,933 |
|
4 |
FCFE4 |
20,097 |
10,485 |
|
5 |
FCFE5 |
22,406 |
10,123 |
|
5 |
Terminal Value (TV5) |
778,207 |
391,992 |
|
Intrinsic value of Mastercard Incorporated |
$460,313 |
|
Market cap of Mastercard Incorporated |
$474.60 Billion |
|
Intrinsic value of Mastercard Incorporated common stock (per share) |
$493.37 |
|
Current share price on 10/23/2024 |
$513.73 |
Required rate of Return
Assumptions
|
Rate of return on LT Treasury Composite(Rf) |
4.36% |
|
Expected rate of return on market portfolio(E(RM) |
13.81% |
|
Systematic risk of Mastercard Incorporated. Common stock (β) |
1.1 |
|
Required rate of return on Mastercard Incorporated Common Stock (r) Calculation : Rf + β(E(RM)- (Rf) = 4.36% +1.1[13.81% - 4.36%] |
14.7% |
FCFE Growth rate Forecast
Mastercard Incorporated. H-Model
|
Year |
Value |
Growth Rate |
|
1 |
g1 (PRAT Model) |
8.5% |
|
2 |
g2 (Linear Interpolation) |
9.24% |
|
3 |
g3 (Linear Interpolation) |
10% |
|
4 |
g4 (Linear Interpolation) |
10.74% |
|
5 |
g5 (Single stage model) |
11.49% |
2023 Calculations
|
Retention rate |
80.72% |
|
Dividend yield |
4.50% |
|
Gross Profit Margin |
55.81% |
|
Profit margin |
44.60% |
|
Asset turnover |
0.59 |
|
EPS |
11.9 |
|
PE Ratio |
46.5 |
Sources : Form 10K of Mastercard Incorporated for the fiscal year 2023, https://www.mastercard.com/global/en.html, https://www.stock-analysis-on.net/ , https://finance.yahoo.com/ , https://companiesmarketcap.com/
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