MasterCard (MA) - Get Report , the world's second-largest credit and debit card company, will report third-quarter fiscal 2015 earnings results before the opening bell Thursday. Investors should consider MasterCard if they are looking for a stock poised to outperform the market in the next 12 to 18 months, owing to strong earnings growth.
With shares trading at around $98 -- up 14% in 2015 and 33% in the past 12 months -- MasterCard stock is not cheap. Its price-to-earnings ratio of 30 is nine points higher than that of the S&P 500 (SPX) index. Nonetheless, like its larger competitor Visa (V) - Get Report , which is priced at a P/E of 32, MasterCard shares are priced for growth. And that's exactly what the Purchase, N.Y.-based company has delivered and is expected to deliver in the years ahead.
MasterCard is projected to grow earnings at an annual rate of almost 20% for the next five years. This earnings growth rate would be more than three times the average earnings growth produced by the average company in the S&P 500 in the past couple of years.
Not impressed? Fiscal 2016 earnings-per-share estimates are $3.97, 17% above 2015 projections of $3.37.
That implies a pricey forward P/E of 24, compared to a forward P/E of 17 for the average stock in the S&P 500 index. But it also means MasterCard is expected to significantly accelerate its earnings growth in one or more of the next five years to achieve a five-year annual rate of 20%. In other words, although MasterCard stock is not cheap today, the shares are not likely to get cheaper. And Thursday's results may begin the stock's upward march.
For the quarter that ended in September, the average analyst earning-per-share estimate calls for 88 cents a share on revenue of $2.55 billion, compared to the year-ago quarter, when the company earned 87 cents a share on revenue of $2.50 billion. For the full year, ending in December, earnings are projected to climb 9% year over year to $3.37 a share, while expected revenue of $9.75 billion would mark a year-over-year increase of 3%.
That full-year earnings are projected to climb at three times the rate of revenue underscores the company's attention to profitability, explaining why the shares have a consensus buy rating and an average analysts 12-month price target of $108. Given the improved labor and wage market that should fuel future spending, MasterCard is poised to process more transactions in the quarters and years ahead, which should help it generate more revenue and profits for its shareholders.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.