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Before the Call: Leave Home Without MasterCard

Visa, AmEx, Discover, MasterCard -- you can almost play cards with all the varieties of credit cards out there today. But of these many options, only two plan to report earnings on Monday. Let's run a credit check on MasterCard (NYSE: MA  ) now, and we'll deal with Visa (NYSE: V  ) in a minute.

We'll have time aplenty to dissect the specific numbers next week. But before we begin obsessing over MasterCard's short-term progress, let's use this weekend to review what investors think about it as a long-term investment. Our tool in this endeavor: Motley Fool CAPS, where we poll nearly 100,000 investors for their views on well over 5,000 companies, MasterCard included. Here's what Fools have to say about the company and its long-term prospects.

Up or down?
On CAPS, 2,162 investors have submitted ratings on MasterCard. Their verdict: "Eh. We could take it with us, or leave home without it."

Nine out of 10 Fools polled agree that MasterCard is a winner. Then again, many Fools tend to take a "if you can't say anything nice, don't say anything at all" approach to rating stocks on CAPS. Because a 10% "unfavorable" sentiment may be more significant than it first appears, MasterCard scores just three stars out of five possible on CAPS -- which puts it squarely in the middle of the pack of credit card companies:

Credit Card Group

CAPS Rating



American Express (NYSE: AXP  )


Bank of America (NYSE: BAC  )




JPMorgan Chase (NYSE: JPM  )


Discover Financial


Capital One (NYSE: COF  )


Wall Street vs. Main Street
Wall Street has no such reservations. Of the 18 professional analysts whose buy/sell opinions on MasterCard we track, the voting goes 18-0 in favor. (Which is not surprising when you consider that the stock has more than doubled over the past year.)

Bull pitch
The top-rated CAPS pitch for MasterCard argues that that double-plus performance is just the beginning. zo6racer writes:

MA is a great company, they don't have any credit risk and they profit every time you swipe your card. With prices rising, fewer and fewer people are paying cash, especially at the pump, and they are defaulting to good old Master Card Plastic. MA on any pullback is a buy.

Bear pitch
Even bears love MasterCard -- but like the firm's eponymous plastic, their love has a limit. CAPS All-Star pnouri sets that limit at:

under 125, but at 210, it is sky high expensive and priced to perfection. This reminds me of [Google (Nasdaq: GOOG  ) ] at 750. At that time, with the same earnings estimates it now has, nothing could be wrong with it. But alas, the recession might actually hurt GOOG. Same with MA. Although they have no direct credit exposure, they do have economic exposure. Growth estimates are very high for the next 2 years, so if you are a buyer, I think you should do so with caution.

MasterCard's been an absolutely stellar performer since its IPO, but you have to admit -- pnouri has a point about the price. The stock currently trades for 26 times forward earnings. Most market pundits don't see it growing much faster than 19% per year over the next half decade. At that valuation, the stock's cheap-er than Visa, but it's not yet cheap. Perhaps discretion is the better part of valor here, and you should heed the bullish admonition above: Wait for a pullback before reaching for your wallet.

Who said that?
To learn the identities of the wise Fools who penned these words, examine their records (and see whether they know whereof they speak), and explore the plethora of additional financial data we've put together on the company, just click here. To read a similar analysis on Visa, click here.

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