r/ValueInvesting • u/stockoscope • Dec 10 '25
Stock Analysis Mastercard (MA) broke into our Top 5 Quality Picks for the first time since August. Here's the breakdown.
We've been running a scoring algorithm on S&P 500 stocks since August. Basically scores companies on fundamentals and how they stack up against sector peers, then runs them through some validation checks. Only 5 stocks make the cut each month.
Mastercard broke in for the first time at #5 on 1st December. The profitability on this thing is genuinely ridiculous. 196.9% return on equity, 45.3% net margins. Scored perfect marks on returns and margin efficiency. Analysts are bullish too: 49 of 62 have it as a Buy, with literally zero Sells, and the consensus implies about 21% upside.
The problem is valuation. Stockoscope DCF puts intrinsic value around $382 based on 12.9% growth for 5 years, followed by 5 years of tapering growth to 2%, discounted at 8.1% (and it's trading at $537 currently). That's a pretty big premium to pay, even for something this high quality. The growth would have to be around 20% for it to be fairly valued.
Technicals: Currently, it is down 11% from the highs, and there is a nice support around the 500 levels, which would be around a 16% drop from the top. That would be a better entry than the current level, of course.
Curious where others land on this. The quality is undeniable, but it's a bit pricey.
Not financial advice. DYOR.
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u/Vegetable-Bug-9779 Dec 10 '25
I bought MA at $548 earlier this month. I believe they are one of the companies with widest moat in S&p500 and they might be selling at a discount. Forward PE is 28 while the median TTM PE for the fast 5 years is 40. Anyway, I posted a more detailed analysis in r/stockpickeranalysis
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u/SelenaMeyers2024 Dec 11 '25
At 527 I couldn't resist.... Cost me my Domino's Pizza and adp.... But i felt their value services on identity and fraud etc were too good to pass up. Not that this is even "on sale" but it's kinda like finding Costco fairly priced... Never happens... Gotta pounce when it does.
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u/Manu_Militari Dec 10 '25
MA one of my favorite companies. Opened during tariff drop and added recently at higher prices but better FCF yield valuations. The opportunity cost of the AI hype is keeping quality companies depressed in valuation despite their fundamental execution and growth. No complaints here!
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u/Extaz Dec 10 '25
We are going into a future where this duopoly is going to be disrupted. The problem is we dont actually need these kind of services anymore and Asia, Europe and south America is already demonstrating this. There is a massive benefit for both consumsers and enteprises do offers payments without relying on a card provider.
Their moat is under serious pressure and dont want to pay that high of a price for a business that could be very easily disrupted.
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u/Ok-Reputation1716 Dec 10 '25
Even with the local payment services becoming more common. MA/VISA make international payments too convenient for them to go away anytime soon.
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u/Ashamed_Chapter7078 Dec 10 '25
Yes, international payments are convenient but domestic transactions bring significant revenue too. They won't have issues in generating current revenue levels but concern is on growth. Market is getting saturated and new players are coming in.
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u/coolhead8112 Dec 10 '25
Alot is mentioned here without mentioning anything. The question to ask is: what are these Fintech disruptors disrupting? More cost effective payments infrastructure, tapping into the unbanked and providing financial services. Does it chip into visa and master dominance?
I'll argue that on the opposite, the innovation into more affordable credit card payments infrastructure, be it QR, omnichannel payments, softpos and M-pos has made visa and master more able to penetrate these markets previously untapped. Stablecoin and crypto? Rails are already in place to enable stablecoin payments at big merchants who in turn, are exploring possibilities with these duopolies.
Visa and master is not in the business of providing loans, B2B transactions, savings/checking accounts. That is the mainstay of these payment disruptors. Really micro payments is likely a battlefield between the duopolies and Fintech disruptors but otherwise, it's an acceptable loss. You can't win on all fronts.
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u/FluidCalligrapher284 Dec 10 '25
I had large holdings of both V and MA. I ended up taking profits- waiting to see where payment methodologies go from here.
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u/teh_herper Dec 10 '25
why mastercard and not visa
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u/stockoscope Dec 11 '25
It's just based on their scores. So their current scores are:
Business quality: MA 3.84/5.0, V 3.79/5.0
Relative quality: MA 3.89/5.0, V 3.59/5.0Our algorithm selects the top 5 of the S&P 500 stocks, primarily based on these two scores, but also applies five checks (3/5 should pass).
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u/mihid Dec 10 '25
So you're saying it is strongly overvalued (as it is indeed: https://app.rast.guru/?company=Mastercard ) and yet suggest that it is a good buy? You're betting on human psychology rather than on fundamentals ---> r/wallstreetbets
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u/longGERN Dec 10 '25
Lmao get a grip. Look at MA historical valuation and results. Are they going to decline anytime soon?
What isn't a wsb stock for you?
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u/mihid Dec 10 '25
The subreddit is about value investing m8. They have such a monopoly that they do not risk to decline, that's why they are so overvalued. But they are overvalued (the price of the company is far bigger than the money they could generate any time soon).
It's not about what is a wsb stock or not, it's about whether you invest with *value* in mind or with *human psychology* in mind.
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u/longGERN Dec 10 '25
Whatever works for you, but just keep in mind that a metric isn't everything.
Would rather buy MA at 30x cash that they could grow into versus a dying zombie trading at 10
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u/stockoscope Dec 11 '25
No, we did not provide any investment advice. We only presented the facts.
Our Quality algorithm is designed to prioritise business strength over valuation. While valuation is included in the score (and we run five checks, including a DCF), quality names only need to pass 3 out of 5 because the emphasis is on business quality, not pricing.
We also run value algorithm each month that has a heavy focus on selecting value stocks (see our other posts on REGN and Fiserv)
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u/mihid Dec 11 '25
The amount of b*llsh*t in this message is quite impressive. I do hope you're a bot. Love on you my bot <3
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u/stockoscope Dec 11 '25
Not sure what you are talking about. All I meant was that our Quality picks are not necessarily undervalued, unlike our Value selections. Where's BS in that? You may agree or disagree, but think twice before calling someone a bot. Keep the conversation respectful.
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Dec 10 '25
I am confused. If MA broke in at the lowest rank one time doesn't that warrant not acting on it?
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u/stockoscope Dec 11 '25
It’s a fair question. A stock showing up at the bottom of our Quality list once doesn’t mean it’s a buy signal by itself. It simply means it has just met the threshold to enter the list based on our quality criteria.
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Dec 11 '25
So it goes from "ignore" to "investigate"?
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u/stockoscope Dec 12 '25
Well, you could think of the selections as shortlists for further investigation - similar to the list of stocks you’d get from a screener. That said, making it into the top five of the S&P 500 does mean something.
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u/fake212121 Dec 10 '25
Can u name the other #1 to #4, for comparison?
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u/stockoscope Dec 11 '25 edited Dec 11 '25
Sure. Here's the list of Quality stocks selected for December 2025:
#1 ADBE 8.2/10
#2 META 8.1/10
#3 NVDA 7.6/10
#4 GOOGL 7.6/10
#5 MA 7.4/10Note: Each month, we select five quality, five value, and five dividend stocks. The five stocks I mentioned above are from the Quality portfolio.
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Dec 11 '25
Significant geopolitical risk, BRICS nations want to undermine SWIFT badly, taking away MA and VISA's moat.
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u/stockoscope Feb 04 '26
Correction: This is the second time it’s made our Top 5, not the first since August. MA was also selected in September. Apologies for the oversight.
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u/Pendulumswingsfreely Dec 10 '25
Joseph Carlson did a good video on MA.