Is MasterCard’s Stock a Buy Now?

Mastercard-LogoWith shares of MasterCard (NYSE:MA) trading around $521, is MA an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Technicals on the Stock Chart are Strong

MasterCard (NYSE:MA) has been on a tear over the last couple of years. Since the beginning of 2013 the stock price has been in a fairly pronounced upward trend, rising 6.35 percent this year-to-date and rising 31.98 percent year-over-year. As a benchmark, the S&P 500 has risen 6.87 percent year-to-date, and has risen 13.47 percent year-over-year.

The stock is currently trading above its 20, 50, 100, and 200-day simple moving averages. The stock price was recently 0.40 percent above its 20-day simple moving average, or SMA; 2.91 percent above its 50-day SMA; and 14.30 percent above its 200-day SMA.

MA is less than 3% from all-time highs. The stock broke-out to new highs on increasing volume at the beginning of the year and has been consolidating on light volume since. After some consolidation, the stock should continue its uptrend higher with no resistance in sight.

E = Earnings Are Increasing Quarter-Over-Quarter

Quarterly sales and earnings growth have been…

increasing over the last 4 quarters. Earnings growth for the last 4 quarters has been 24.94% (Q1), 16.60% (Q2), 9.59% (Q3), and 2759% (Q4). While revenue growth for the last 4 quarters has been 17.12% (Q1), 9.18% (Q2), 5.50% (Q3), and 9.66% (Q4). Therefore, sales and earnings growth are helping drive the stock price higher.

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 1,728 1,758 1,820 1,918 1,895
Diluted EPS ($) 0.17 5.36 5.55 6.17 4.86

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T = Trends Support the Industry in which the Company Operates

MasterCard operates in a growing industry that has more room to grow. The credit card and business services industries are becoming increasingly more popular as technology advances in a paperless economy. Moreover, businesses and consumers are moving funds faster and more efficiently, making the ease and service MasterCard provides a key value proposition.

Conclusion

MasterCard’s price chart is amazing. The trend is as beautiful as can be. Once the all-time highs are cleared (3% away), there is no resistance in sight. So, smooth sailing could be ahead.

These prices are supported by the consistently increasing sales and earnings growth. Last quarter, earnings increased 2759% (y-o-y) while sales increased 9.66% (y-o-y) — amazing numbers for a company this size.

Aside from the fundamentals supporting rising prices, the credit card, payments, and business services industry is booming. With business and consumers looking to process transactions with efficiency and ease, MasterCard is in the right business at the right time during great market conditions. Look for this stock to OUTPERFORM.

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