Image Source: Pixabay

Each week, we conduct a brief analysis on one of the companies in our screens. This week, we thought we’d take a look at a stock that is not currently in our screens, Mastercard Inc (MA).

Profile

Mastercard is the second-largest payment processor in the world, having processed close to over $9 trillion in volume during 2023. Mastercard operates in over 200 countries and processes transactions in over 150 currencies.

Recent Performance

Over the past twelve months, the share price has moved up 15.97%.

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Image Source: Google Finance

Inputs

• Discount Rate: 9%
• Terminal Growth Rate: 2%
• WACC: 9%

Forecasted Free Cash Flows (FCFs)

Terminal Value

• Terminal Value = FCF * (1 + g) / (r – g) = 278.46 billion

Present Value of Terminal Value

• PV of Terminal Value = Terminal Value / (1 + WACC)^5 = 180.98 billion

Present Value of Free Cash Flows

• Present Value of FCFs = ∑ (FCF / (1 + r)^n) = 59.72 billion

Enterprise Value

• Enterprise Value = Present Value of FCFs + Present Value of Terminal Value = 240.70 billion

Net Debt

• Net Debt = Total Debt – Total Cash = 7.97 billion

Equity Value

• Equity Value = Enterprise Value – Net Debt = 232.73 billion

Per-Share DCF Value

• Per-Share DCF Value = Enterprise Value / Number of Shares Outstanding = $248.91

Conclusion

Based on the DCF valuation, the stock is overvalued. The DCF value of $248.91 share is lower than the current market price of $441.16. The Margin of Safety is -77.88%.

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