Mastercard Inc (MA) DCF Valuation: Is The Stock Undervalued?

As part of a new series, each week we typically conduct a DCF on one of the companies in our screens. This week we thought we’d take a look at one of the stocks that is not currently in our screens, Mastercard Inc ().
 ProfileMastercard is the second-largest payment processor in the world, having processed close to over $9 trillion in volume during 2023. Mastercard operates in over 200 countries and processes transactions in over 150 currencies.
 Recent PerformanceOver the past twelve months the share price is up 25.60%.Source: Google FinanceInputs

Discount Rate: 8%

Terminal Growth Rate: 2%

WACC: 8%

Forecasted Free Cash Flows (FCFs)

Year FCF (billions) PV(billions) 2024 12.51 11.58 2025 13.91 11.93 2026 15.46 12.27 2027 17.19 12.64 2028 19.11 13.01

Terminal ValueTerminal Value = FCF * (1 + g) / (r – g) = 324.87 billionPresent Value of Terminal ValuePV of Terminal Value = Terminal Value / (1 + WACC)^5 = 221.10 billionPresent Value of Free Cash FlowsPresent Value of FCFs = ∑ (FCF / (1 + r)^n) = 61.42 billionEnterprise ValueEnterprise Value = Present Value of FCFs + Present Value of Terminal Value = 282.52billionNet DebtNet Debt = Total Debt – Total Cash = 8.25 billionEquity ValueEquity Value = Enterprise Value – Net Debt = 274.27 billionPer-Share DCF ValuePer-Share DCF Value = Enterprise Value / Number of Shares Outstanding = $299.43
 Conclusion

DCF Value Current Price Margin of Safety $299.43 $502.26 -67.74%

Based on the DCF valuation, the stock is overvalued. The DCF value of $299.43 share is lower than the current market price of $502.26. The Margin of Safety is -67.74%.More By This Author:The One Stock That Superinvestors Are Dumping: Is It Time To Sell JPM? The Home Depot Inc: Is It a Buy?Large-Cap Stocks In Trouble – Saturday, Oct. 19