Stock Analysis on Net

Mastercard Inc. (NYSE:MA)

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Dividend Discount Model (DDM)

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In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Dividends are the cleanest and most straightforward measure of cash flow because these are clearly cash flows that go directly to the investor.

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Intrinsic Stock Value (Valuation Summary)

Mastercard Inc., dividends per share (DPS) forecast

US$

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Year Value DPSt or Terminal value (TVt) Calculation Present value at
0 DPS01
1 DPS1 = × (1 + )
2 DPS2 = × (1 + )
3 DPS3 = × (1 + )
4 DPS4 = × (1 + )
5 DPS5 = × (1 + )
5 Terminal value (TV5) = × (1 + ) ÷ ()
Intrinsic value of Mastercard Inc. common stock (per share)
Current share price

Based on: 10-K (reporting date: 2021-12-31).

1 DPS0 = Sum of the last year dividends per share of Mastercard Inc. common stock. See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.


Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF
Expected rate of return on market portfolio2 E(RM)
Systematic risk of Mastercard Inc. common stock βMA
 
Required rate of return on Mastercard Inc. common stock3 rMA

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rMA = RF + βMA [E(RM) – RF]
= + []
=


Dividend Growth Rate (g)

Dividend growth rate (g) implied by PRAT model

Mastercard Inc., PRAT model

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Average Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Selected Financial Data (US$ in millions)
Dividends
Net income
Net revenue
Total assets
Total Mastercard Incorporated stockholders’ equity
Financial Ratios
Retention rate1
Profit margin2
Asset turnover3
Financial leverage4
Averages
Retention rate
Profit margin
Asset turnover
Financial leverage
 
Dividend growth rate (g)5

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

2021 Calculations

1 Retention rate = (Net income – Dividends) ÷ Net income
= () ÷
=

2 Profit margin = 100 × Net income ÷ Net revenue
= 100 × ÷
=

3 Asset turnover = Net revenue ÷ Total assets
= ÷
=

4 Financial leverage = Total assets ÷ Total Mastercard Incorporated stockholders’ equity
= ÷
=

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= × × ×
=


Dividend growth rate (g) implied by Gordon growth model

g = 100 × (P0 × rD0) ÷ (P0 + D0)
= 100 × ( × ) ÷ ( + )
=

where:
P0 = current price of share of Mastercard Inc. common stock
D0 = the last year dividends per share of Mastercard Inc. common stock
r = required rate of return on Mastercard Inc. common stock


Dividend growth rate (g) forecast

Mastercard Inc., H-model

Microsoft Excel LibreOffice Calc
Year Value gt
1 g1
2 g2
3 g3
4 g4
5 and thereafter g5

where:
g1 is implied by PRAT model
g5 is implied by Gordon growth model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= + () × (2 – 1) ÷ (5 – 1)
=

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= + () × (3 – 1) ÷ (5 – 1)
=

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= + () × (4 – 1) ÷ (5 – 1)
=