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Mastercard (MA) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Comprehensive analysis of Mastercard's (MA) financial health for 2023, scoring 7 out of 9 on the Piotroski F-Score. Explore profitability, liquidity, and efficiency metrics.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 7

We're running Mastercard (MA) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
1
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
1
Current Ratio is growing?
0
Number of shares not diluted?
1
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
1

The Piotroski F-Score helps investors choose strong, undervalued stocks by evaluating profitability, liquidity, and leverage on a scale from 0 to 9. Mastercard (MA) scores 7 on this scale, indicating a solid financial position. Positive trends include consistent profitability, positive cash flow from operations, increased Return on Assets (ROA), higher operating cash flow compared to net income, reduced leverage, fewer outstanding shares, and improved Asset Turnover Ratio, suggesting efficient asset use. However, there's a slight dip in its Current Ratio and Gross Margin, signaling minor concerns in liquidity and operational costs.

Insights for Value Investors Seeking Stable Income

Overall, Mastercard (MA) appears to be a robust investment option based on its Piotroski Score of 7. The strong profitability, efficient asset use, and manageable debt levels are positive indicators. While there are minor concerns with the Current Ratio and Gross Margin, they do not overshadow the company's solid financial footing. Therefore, it is worth considering Mastercard for potential investment, especially if you value a proven track record of profitability and financial stability. However, it’s always prudent to conduct further research or consult with a financial advisor before making investment decisions.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Mastercard (MA)

Company has a positive net income?

Net income reflects a company's profitability, influencing investor confidence and potential growth opportunities.

Historical Net Income of Mastercard (MA)

Mastercard (MA) has reported a net income of $11.195 billion in 2023, indicating a profitable year. This performance marks a continuation of positive net income over the past decade, reflecting a solid growth trajectory. Analyzing historical data, one observes a robust upward trend from a loss in 2003 to consistent profitability since 2007, even weathering the 2008 financial crisis and the COVID-19 pandemic. Thus, this positive outcome in 2023 earns Mastercard a full point in the Piotroski analysis.

Company has a positive cash flow?

This criterion checks if the company has positive cash flow from operations (CFO). Positive CFO indicates that a company is generating more cash than it is using, which is an important indicator of financial health.

Historical Operating Cash Flow of Mastercard (MA)

In 2023, Mastercard reported a Cash Flow from Operations (CFO) of $11.98 billion. This is indeed positive, marking a strong position for the company in terms of its core cash-generating ability. Historically, Mastercard has shown a consistent upward trend in its CFO over the last 20 years, starting from $190.45 million in 2003 and consistently growing to the present levels. This continuous positive CFO is indicative of Mastercard's effective business model, sustainable operations, and robust financial management. Thus, we assign 1 point for this criterion.

Return on Assets (ROA) are growing?

The criterion compares the Return on Assets (ROA) year-over-year to assess any improvement. ROA indicates how efficiently a company uses its assets to generate profit. A higher ROA suggests improved operational efficiency.

Historical change in Return on Assets (ROA) of Mastercard (MA)

For Mastercard (MA), the Return on Assets (ROA) increased from 0.26 in 2022 to 0.2758 in 2023. This increment is a positive sign, indicating better asset utilization and improved profitability. Over the last 20 years, Mastercard's ROA has generally trended upward, reflecting progressive gains in operational efficiency. For instance, in 2021, the ROA was 0.8301, markedly higher than the industry median that year (0.7248). Although the ROA for 2023 is lower compared to historical peaks, the crucial point is the observed increase from 2022 to 2023, which earns Mastercard a score of 1 on this Piotroski criterion. Consistently outperforming the industry median ROA strengthens Mastercard's competitive positioning and signifies effective management.

Operating Cashflow are higher than Netincome?

The criterion evaluates if a company's operating cash flow is higher than its net income, indicating earnings quality and cash-generating ability.

Historical accruals of Mastercard (MA)

For Mastercard (MA) in 2023, the operating cash flow is $11.98 billion, which surpasses the net income of $11.195 billion. This trend is favorable and warrants a score of 1 point. This is important because a higher operating cash flow relative to net income usually suggests that the company is effectively converting revenue into cash, implying healthier operations. Historically, Mastercard has exhibited a robust and steadily increasing operating cash flow over the years, reinforcing the company's ability to generate sufficient cash to support its net income and further solidifying its financial stability.

Liquidity of Mastercard (MA)

Leverage is declining?

Change in Leverage tracks how much a company's debt levels have changed over a period. It is vital as it indicates the company's financial risk and stability.

Historical leverage of Mastercard (MA)

For Mastercard (MA), the leverage has decreased from 0.3551 in 2022 to 0.3379 in 2023, a positive sign suggesting improved financial stability and lower debt levels. This decrease merits adding 1 point in the Piotroski Score. Over the past two decades, Mastercard has generally maintained low leverage ratios, with a significant increase in leverage starting around 2014, peaking at 0.358 in 2020. However, the recent reduction is a reversal of this trend, indicating a cautious approach towards debt management.

Current Ratio is growing?

Change in Current Ratio assesses a company's ability to pay short-term obligations with short-term assets. An increase suggests improved liquidity.

Historical Current Ratio of Mastercard (MA)

Comparing the Current Ratio of 1.1658 in 2023 with 1.1718 in 2022 shows a slight decrease, signaling a marginal deterioration in Mastercard's liquidity. Although the decline from 1.1718 to 1.1658 is small, it's not favorable for this Piotroski criterion. Over the last 20 years, the Current Ratio has seen significant fluctuations, peaking at 2.0535 in 2010, while the industry median was generally lower. Despite a consistent trend of Mastercard's Current Ratio being higher than the industry median, this year’s slight decrease indicates a small but noteworthy drop in liquidity. Therefore, for this criterion, Mastercard would score 0 points as the Current Ratio has not increased.

Number of shares not diluted?

Change in Shares Outstanding examines whether a company's number of shares outstanding has decreased compared to the previous year. A decrease is scored positively.

Historical outstanding shares of Mastercard (MA)

For Mastercard (MA), the number of outstanding shares decreased from 968 million in 2022 to 944 million in 2023. Despite this being a good indicator of potential share buybacks, when we look at the trend over the last 20 years, the outstanding shares have steadily decreased from 1 billion in 2003. This continuous reduction is generally perceived positively as it signifies efforts to increase shareholder value through buybacks. Therefore, Mastercard receives 1 point for this criterion.

Operating of Mastercard (MA)

Cross Margin is growing?

Gross margin determines the percentage of revenue that exceeds the cost of goods sold. An increase gives a company more capital to cover operating expenses, such as research and development or marketing.

Historical gross margin of Mastercard (MA)

Mastercard's Gross Margin declined from 0.7633 in 2022 to 0.7601 in 2023, reflecting a slight decrement. Therefore, based on the Piotroski Analysis, this criterion would receive a score of 0. This minor decrease in Gross Margin, while not significantly large, still signals potential areas for cost optimization given the high benchmarks Mastercard has set over the years.\nHistorical data shows a remarkable consistency, notably maintaining a Gross Margin above 0.75 for the last decade. In contrast, the industry's median Gross Margin data seems more unstable, peaking as high as 0.8301 in 2021, but lacking coherent trends fort 2023. Mastercard’s relatively minor GM decrease could be seen as maintaining a stable performance within an inherently volatile sector.

Asset Turnover Ratio is growing?

Asset turnover is an efficiency ratio that measures a company's ability to generate sales from its assets. Higher ratios indicate better performance.

Historical asset turnover ratio of Mastercard (MA)

The Asset Turnover ratio for Mastercard increased from 0.5822 in 2022 to 0.6184 in 2023. This improvement signals a positive trend, where the company is utilizing its assets more efficiently to generate revenue. Particularly noteworthy is the progression from the challenging economic environment of 2020, where the ratio was 0.4871, to its steady increase in subsequent years. This positive trend can be attributed to enhanced operational efficiency and strategic asset management, thereby adding 1 point under the Piotroski F-Score criterion.


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