Mastercard IncorporatedMANYSE
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DCF Valuation
DCF Valuation Summary
Hold
Fair Value: $521.26 per share(market-calibrated)
-0.3%
Upside to Fair Value
Current
$522.92
Pure Model
$523.95
Fair Value
$521.26
Bull Case
$706.43
Bear Case
$381.76
Market Reality Check
Model Terminal Growth
2.50%
Market-Implied Growth
1.97%
Calibrated Growth
2.42%
Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $523.95.
What's Driving This Ratingfor MA
↓
CapEx normalizing toward maintenance
Historical CapEx is 1.98% of revenue (heavy investment phase). Model fades this to 1.50% by Year 10, freeing up ~$364M in annual FCF. This is the biggest driver of long-term cash flow improvement.
✓
Premium margins already priced in
EBIT margin of 60.01% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.
↑
Strong near-term revenue growth
Analyst consensus projects 12.80% revenue growth in Year 1, fading to 11.00% by Year 5 and 2.50% by Year 10. Revenue reaches $76.1B by Year 10 (vs $32.8B today).
✓
Model and market roughly agree
Market-implied terminal growth of 1.97% is close to the model's 2.50% (only 53bps apart). The DCF assumptions are well-aligned with how the market is pricing this stock.
✓
Strong cash flow conversion
Year 10 FCF/EBITDA conversion of 78.80% indicates efficient cash generation. FCF reaches $37.9B by Year 10 (49.82% FCF margin).
Weighted Average Cost of Capital (WACC)
Cost of Equity (CAPM)
Risk-Free Rate (Rf)4.50%
Beta (β)0.84
Market Risk Premium4.50%
*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)
Cost of Equity (Re)8.26%
Cost of Debt
Pre-tax Cost of Debt2.99%
Tax Rate19.43%
After-tax Cost of Debt2.41%
Equity Weight (E/V)96.11%
Debt Weight (D/V)3.89%
WACC Calculation
WACC = (E/V × Re) + (D/V × Rd × (1-Tc))
WACC = (96.11% × 8.26%) + (3.89% × 2.41%)
= 8.03%
10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)
| Year | Year 1 | Year 3 | Year 5 | Year 7 | Year 10 |
|---|---|---|---|---|---|
| Revenue | $37.0B | $46.6B | $57.2B | $67.2B | $76.1B |
| EBIT | $22.2B | $28.0B | $34.3B | $40.4B | $45.6B |
| Tax | $4.3B | $5.4B | $6.7B | $7.8B | $8.9B |
| NOPAT | $17.9B | $22.6B | $27.6B | $32.5B | $36.8B |
| + Depreciation | $1.2B | $1.5B | $1.8B | $2.2B | $2.4B |
| - Capex | $732M | $874M | $1.0B | $1.1B | $1.1B |
| - Δ NWC | $420M | $514M | $567M | $475M | $186M |
| Free Cash Flow | $17.9B | $22.7B | $27.9B | $33.1B | $37.9B |
| Discount Factor | 0.926 | 0.793 | 0.680 | 0.582 | 0.462 |
| Present Value | $16.6B | $18.0B | $19.0B | $19.3B | $17.5B |
FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital
Terminal Value Calculation
Perpetuity Growth Method
Year 10 FCF$37.9B
Terminal Growth Rate2.50%
WACC8.03%
TV = FCF₁₀ × (1+g) / (WACC-g)
Terminal Value$701.9B
PV of Terminal Value$324.1B
Exit Multiple Method
Year 10 EBITDA$48.1B
Exit Multiple (EV/EBITDA)12.0x
TV = EBITDA₁₀ × Exit Multiple
Terminal Value$577.1B
PV of Terminal Value$266.5B
Valuation Summary
Perpetuity Growth Method
PV of Projected FCFs$182.6B
PV of Terminal Value$324.1B
Enterprise Value$506.7B
(-) Net Debt$7.9B
Equity Value$498.8B
Shares Outstanding897M
Price per Share$556.05
Exit Multiple Method
PV of Projected FCFs$182.6B
PV of Terminal Value$266.5B
Enterprise Value$449.1B
(-) Net Debt$7.9B
Equity Value$441.2B
Shares Outstanding897M
Price per Share$491.84
Pure Model Fair Value
$523.95
Average of perpetuity growth and exit multiple methods (before market calibration)
Sensitivity AnalysisPrice per Share
| WACC ↓ / Growth → | 1.50% | 2.00% | 2.50% | 3.00% | 3.50% |
|---|---|---|---|---|---|
| 6.03% | $659.62 | $693.70 | $737.42 | $795.54 | $876.60 |
| 7.03% | $564.97 | $585.54 | $610.63 | $641.94 | $682.12 |
| 8.03% | $494.81 | $508.17 | $523.95 | $542.86 | $565.93 |
| 9.03% | $439.95 | $449.10 | $459.65 | $471.95 | $486.47 |
| 10.03% | $395.47 | $401.98 | $409.36 | $417.79 | $427.51 |
How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.
Scenario Analysis
Bear Case
$381.76
-27.0% vs current
- • -25% vs analyst consensus
- • Terminal growth: 2.0%
- • Beta: 1.04
Base Case
$523.95
0.2% vs current
- • Analyst consensus
- • Terminal growth: 2.5%
- • Beta: 0.84
Bull Case
$706.43
35.1% vs current
- • +25% vs analyst consensus
- • Terminal growth: 3.0%
- • Beta: 0.71
Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Financial Services Sector
Growth Assumptions (Select Years)
Year 1 Revenue Growth12.80%
Year 3 Revenue Growth12.39%
Year 5 Revenue Growth11.00%
Year 7 Revenue Growth7.60%
Year 10 Revenue Growth2.50%
Terminal Growth Rate2.50%
Margin & Efficiency
Current EBIT Margin60.01%
Tax Rate19.43%
Historical Capex / Rev1.98%
Terminal Capex / Rev1.50%
NWC / Revenue10.00%
Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.
Institutional-Grade Methodology
Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta
Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 12x EV/EBITDA (Financial Services sector)
This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.