Mastercard (MA)

Global payments market should provide significant opportunities for growth and has low variable costs as transaction volume increases.

MA acquired the Dublin-based software firm Orbiscom for $100 million. Orbiscom will provide MA with an array of electronic financial instruments. In a time when banks are restructuring, these financial instruments could be used to automate processes and improve efficiency. The Orbiscom price tag was 10% of MA's net income, so the company is confident in its growth.

MasterCard announced $1 billion share buyback and announced that profit will rise faster than some analysts had predicted. MA's federal filing estimates state that earnings per share growth will average at least 20 percent compounded annually from 2011 through 2013. Annual operating margins will be at least 50 percent and net revenue, compounded annually, will increase 12 percent to 14 percent.

MasterCard announced $1 billion share buyback and announced that profit will rise faster than some analysts had predicted. MA's federal filing estimates state that earnings per share growth will average at least 20 percent compounded annually from 2011 through 2013. Annual operating margins will be at least 50 percent and net revenue, compounded annually, will increase 12 percent to 14 percent.

Both Visa and Mastercard have huge advertising/marketing bugets. Both companies can manage earnings by managing these budgets. 20% EPS growth is virtually assured for quite a few years hence.

Obviously this isn't creating true value but the market will pay for it over the course of a few years.

MA has demonstrated its commitment for its debit card growth through its PayPass partnerships with merchants, such as Best Buy, McDonalds, and CVS. Its most recent deal with Whataburger on August 25 allow its PayPass to be accepted at more than 500 locations in the South.

Additionally, MA has more upward debit transaction growth potential than its rival, Visa.

High profile global brand may allow relatively unchanged pricing with smaller customers.

MasterCard will implement a price increase in the domestic market on April 1, 2010. MA is expected to increase its merchant assessment fee from 9.5 basis points to 11 basis points, which analysts predict would likely push the fair value of MA' stock to more than 390 per share.