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MA Stock vs. V Stock – Will MasterCard or Visa Charge Ahead in 2014?

Both are crushing the market, but only one can be king next year

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MA Stock – Is MasterCard Set for More Outperformance?

ma-stock-mastercardShare Price: $817
YTD Performance: +67%
Market Cap: $98.35

MasterCard (MA) lately has been delivering a steady stream of good news to anyone holding MA stock. MasterCard recently raised its dividend 83% to $1.10 a share and announced a new program to buy back up to another $3.5 billion in MasterCard stock.

In a move even more likely to boost MA stock in the short term, MasterCard will split its shares by 10-1 in January. That will bring the face price of MasterCard stock down to about $82 from $817, which should help draw interest from individual investors put off by the sky-high nominal price.

In addition to the financial engineering and stock split, MA stock has some fundamental tailwinds too. MasterCard profit is forecast to jump 18% next year to $31.11 a share from $26.39 (not accounting for the upcoming stock split). That strong earnings growth should be driven by a 12% gain in revenue, driven by higher cross-border volumes, better pricing and further growth in processed transactions. Indeed, for the first nine months of this year, MasterCard saw a 13% rise in processed transactions.

However, MasterCard stock isn’t exactly a bargain. The forward price-to-earnings multiple (P/E) of 26 can be justified by expectations that MasterCard will grow earnings by about 20% a year for the next five years or more, but that doesn’t make MA stock look cheap. Neither does the fact that MA stock currently trades at about a 50% premium to its own five-year average by forward P/E.

Article printed from InvestorPlace Media,

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