MasterCard Incorporated's Buy Recommendation Supported

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

NEW YORK ( TheStreet) -- MasterCard Incorporated (NYSE: MA) has been reiterated by TheStreet Ratings as a buy with a ratings score of A-. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, expanding profit margins, good cash flow from operations and solid stock price performance. We feel these 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 from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 20.5%. Since the same quarter one year prior, revenues rose by 12.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • MASTERCARD INC has improved earnings per share by 7.0% 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, MASTERCARD INC increased its bottom line by earning $2.57 versus $2.19 in the prior year. This year, the market expects an improvement in earnings ($3.05 versus $2.57).
  • The gross profit margin for MASTERCARD INC is rather high; currently it is at 51.08%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 29.30% is above that of the industry average.
  • Net operating cash flow has increased to $1,199.00 million or 38.45% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 21.03%.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 43.06% over the past year, a rise that has exceeded that of the S&P 500 Index. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

MasterCard Incorporated, together with its subsidiaries, provides transaction processing and other payment-related services in the United States and internationally. MasterCard has a market cap of $84.3 billion and is part of the financial sector and financial services industry. Shares are down 10.3% year to date as of the close of trading on Thursday.

You can view the full MasterCard Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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