Last week, you might have seen that Mastercard Incorporated (NYSE:MA) released its annual result to the market. The early response was not positive, with shares down 3.9% to US$316 in the past week. The result was positive overall – although revenues of US$15b were in line with what the analysts predicted, Mastercard surprised by delivering a statutory profit of US$6.37 per share, modestly greater than expected. Earnings are an important time for investors, as they can track a company’s performance, look at what the analysts are forecasting for next year, and see if there’s been a change in sentiment towards the company. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
View our latest analysis for Mastercard
Taking into account the latest results, the most recent consensus for Mastercard from 33 analysts is for revenues of US$18.0b in 2021 which, if met, would be a meaningful 18% increase on its sales over the past 12 months. Per-share earnings are expected to surge 27% to US$8.11. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$18.0b and earnings per share (EPS) of US$8.22 in 2021. The consensus analysts don’t seem to have seen anything in these results that would have changed their view on the business, given there’s been no major change to their estimates.
There were no changes to revenue or earnings estimates or the price target of US$379, suggesting that the company has met expectations in its recent result. There’s another way to think about price targets though, and that’s to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Mastercard analyst has a price target of US$440 per share, while the most pessimistic values it at US$312. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It’s clear from the latest estimates that Mastercard‘s rate of growth is expected to accelerate meaningfully, with the forecast 18% revenue growth noticeably faster than its historical growth of 11%p.a. over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 14% per year. Factoring in the forecast acceleration in revenue, it’s pretty clear that Mastercard is expected to grow at about the same rate as the wider industry.
The Bottom Line
The most obvious conclusion is that there’s been no major change in the business’ prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Mastercard going out to 2025, and you can see them free on our platform here.
You still need to take note of risks, for example – Mastercard has 1 warning sign we think you should be aware of.
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