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 offers integrated products and services for account holders, merchants, financial institutions, businesses, governments, and other organizations, such as programs that enable issuers to provide consumers with credits 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 credit and debit payment products and solutions. It also provides value-added products and services comprising cyber and intelligence products, information and analytics services, consulting services, loyalty and reward programs, processing and open banking services, and issuer and acquirer processing services. The company offers payment solutions and services under the Mastercard, Maestro, and Cirrus. It has a partnership with Bilt Rewards to launch the Bilt Mastercard; and a strategic partnership with Verizon Communications Inc. Mastercard Incorporated was founded in 1966 and is headquartered in Purchase, New York. The company is publicly listed on NYSE under the ticker “MA”.
Mastercard is one of the main international credit companies and also an incredible Wall Street story, characterized by special growth rate, margins and balance sheet. The financial position of the company is solid. The company’s revenue primarily consists of service and cross border transaction fees. With operating margins at 53% and net margins at 46%, a huge chunk of revenue flows to the bottom line: however, while impressive numbers, these are still lower than Visa’s. Furthermore, despite having a $320 billion market capitalization, Mastercard has just $14 billion in debt: even though consumer and business transactions fall during downtimes in market cycles, the strong balance sheet enables the company to buy back shares and acquire other companies during these periods, as it did during the pandemic. The dividend growth, indeed, has been impressive and the current payout ratio seems very safe. Speaking of buybacks, the company repurchased largely during last few years, even though valuations were not always optimal: probably not a good thing for long-term shareholders’ interests.
Also, speaking of the pandemic, while in the short term travel restriction disrupted high-margin cross-border volumes, it was a long-term positive catalyst for the company, accelerating the shift to electronic payments.
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