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Example of analyzing long term performance data for long term investment


For other recent Forum attention to longer term investment analyses that will be addressed in the 2024 series of Direct Access events moderated by the Shareholder Forum and hosted by the CFA Society New York, see:

See also the main page of the Shareholder Forum's project defining Returns on Corporate Capital for the earlier series of articles by the author of the column below providing a foundation for selecting investments based on a company's ability to generate sustainable profits, and for the Forum's "investor tool" that demonstrates analyses of returns on capital for the 5,700 SEC-reporting companies with 5-year data available in 2017 when the project was concluded.


Source: Dow Jones MarketWatch, January 13, 2024, article


Deep Dive

Mastercard’s stock upgrade backed by a high growth estimate and incredible long-term success

Last Updated: Jan. 13, 2024 at 8:17 a.m. ET
First Published: Jan. 11, 2024 at 10:52 a.m. ET

By Philip van Doorn

Oppenheimer analyst Dominick Gabriele sees 19% upside for the stock over the next 18 months


Mastercard has been the best and most consistent performer, based on 10 years of returns on invested capital, among the 72 companies in the S&P 500 financial sector.


On Wednesday, Oppenheimer & Co. analyst Dominick Gabriele upgraded Mastercard Inc. to an “outperform” rating with a 12-18 month price target of $510, which was 19% higher than the stock’s closing price of $428.27 that day.

In a note to clients, Gabriele wrote that there was some concern over his estimated annual earnings-per-share growth rate of 17% for Mastercard MA, +0.56% over the next three to five years, because this was slower than the growth pace before the COVID-19 pandemic. But he concluded that the expected profit growth pace was “good enough” to support his price target.

EPS growth

Looking back, Mastercard’s EPS increased at a compound-annual-growth rate (CAGR) of 29.1% for the three-year period ending 2019. That was an incredible pace for earnings growth, compared with a three-year EPS CAGR of 9.4% for the S&P 500 financial services sector and 10.2% for the full S&P 500 SPX. It was slightly behind the three-year EPS CAGR through 2019 of 29.2% for Visa Inc. V, +0.05%, Mastercard’s main competitor payment processing services.

During 2020, when the pandemic placed a drag on consumer spending, Mastercard’s earnings declined 25% to $6.37 a share. The consensus estimate among analysts polled by FactSet is for the company’s 2023 EPS to total $12.16. If we skip the first pandemic year, that 2023 estimate would make for a 17.9% two-year CAGR from Mastercard’s EPS of $5.90 in 2021.

Mastercard will announce its fourth-quarter results on Jan. 31 before the market open. Visa is scheduled to report its fourth-quarter numbers on Jan. 25, after the market close.

Expected EPS growth from here

Now let’s look ahead, using consensus estimates among analysts polled by FactSet:


Estimated 2023 EPS

Estimated 2024 EPS

Estimated 2025 EPS

Two-year estimated EPS CAGR through 2025

Price/ consensus 2024 EPS estimate

Mastercard Inc. Class A






Visa Inc. Class A






S&P 500 Financials






S&P 500






Source: FactSet

Mastercard and Visa both trade at much higher forward price-to-earnings ratios than the financial sector and the S&P 500. Mastercard trades at the highest P/E, while it is also expected to grow EPS much more quickly than Visa over the next two years.

While Mastercard isn’t a cheap stock, rapid earnings growth commands a premium. Gabriele recommended “buying quality to start 2024 vs. chasing high-flying Fintech stocks at current valuations.”

He added: “We’re incrementally positive on payments after its years of underperformance.”

A very long look back for strong financial performance

FactSet defines a company’s return on invested capital, or ROIC, as its profit divided by the sum of the carrying value of its common stock, preferred stock, long-term debt and capitalized lease obligations.

ROIC is an annualized figure that sheds light on a management team’s ability to make the most efficient use of the money invested to fund its business. It isn’t a perfect tool to measure performance, in part because different industries are naturally more capital-intensive than others. Mastercard and Visa have an advantage over lenders, for example, because their businesses are less capital intensive. They don’t gather deposits or borrow money to fund lending businesses. They simply process payments, which means they don’t take credit risk. (The actual lending is done through banks, which is why you apply to a bank for a Visa or Mastercard.)

FactSet calculates ROIC for rolling 12-month periods. So the most current completed ROIC figures are for 12 months ending Sept. 30. Starting with the 72 companies in the S&P 500 financial sector, if we look back at the past 10 most recent 12-month periods through Sept. 30 and average those ROIC figures, here’s how the top 10 companies rank:



10-year average ROIC through Sept. 30

ROIC for 12 months through Sept. 30

Minimum ROIC for 10 years

Maximum ROI for 10 yeas

Mastercard Inc. Class A






S&P Global Inc.






MarketAxess Holdings Inc.






T. Rowe Price Group






Jack Henry & Associates Inc.






FactSet Research Systems Inc.






Visa Inc. Class A






Moody’s Corp.






Ameriprise Financial Inc.






MSCI Inc. Class A






Source: FactSet

Mastercard has had the best average ROIC for 10 years among companies in the S&P 500 financial sector. It has also achieved the highest ROIC for the most recent period. Its minimum and maximum ROIC have also ranked highest over the past 10 years among the 72 companies in the sector.

Click on the tickers for more about each company.


About the Author

Philip van Doorn

Philip van Doorn writes the Deep Dive investing column for MarketWatch.


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