While Mastercard's stock price has soared this year, shares actually fell the day after Mastercard Inc (NYSE:MA) reported its second quarter earnings. Long-term investors know to concentrate on business fundamentals, though, and when viewed in that light, Mastercard's numbers showed strong growth. The company's fourth-quarter revenue grew to $3.05 billion, up 14% year over year, and non-GAAP EPS rose to $1.10, a 16% year over year increase.

Two other important metrics, gross dollar volume and switched transactions, also showed healthy growth. The gross dollar volume grew to $1.3 trillion, a 9% increase (once adjusted for EU regulatory changes), and switched transactions came in at 16 billion, a 17% year-over-year increase.

Mastercard had more good news to share besides its consistent growth in the company's most important metrics; the company also shared that it had won some important new deals as well. Every quarter, credit card rivals like Mastercard and Visa Inc (NYSE:V) share news of new deals struck and others renewed but, more important for Mastercard investors might be the reasons why this quarter's deals were made.

A Mastercard credit card with the Mastercard logo prominently displayed.

Mastercard management says the company is winning deals based on its valuable services. Image source: Pixabay.

Mastercard's key differentiators

In the conference call's (courtesy of S&P Global Market Intelligence)opening remarks, Mastercard CEO Ajay Banga announced some of the company's new co-brand deals and bank portfolio renewals:

"... in the U.S., we continue to have success in the co-brand space. This quarter, we're pleased to announce Kroger, the largest grocery chain in the world, will be converting their credit portfolio with U.S. Bank to MasterCard, still with U.S. Bank. That's our partner in this co-brand. In addition, we won a new co-brand program with Belk, a department store chain with about 300 locations throughout the United States, and renewed our credit co-brand agreement with Toys"R"Us. We also renewed [Banco] Santander in the U.S. for their credit and debit business, which includes our decision intelligence fraud solutions and gateway processing services. In each of these deals, our innovative solutions and value-added services were key differentiators for us."

The last sentence is key: According to Banga, Mastercard didn't win these deals on price, but on its differentiating services and solutions. Some of these deals are nothing to sneeze at either: For instance, Kroger operated 3,885 retail locations and saw more than $115 billion in sales in 2016.

Mastercard's full suite of digital payment solutions

Over the past two years, Mastercard has internally developed and acquired several services that it has been able to bundle and sell to card-issuers and merchant partners. These products generally enhance security practices and remove friction points from the payment process. These services include diverse offerings from Mastercard's "Selfie Pay" program, which requires users who opt in to the program to take a picture of themselves to authenticate online purchases, to its acquisition of NuData Security, which uses passive biometrics to determine if purchases are fraudulent.

These services and products have helped boost Mastercard's revenue growth over the past several years. Unceremoniously categorized together under what Mastercard calls "Other Revenues", this revenue segment grew to $694 million this quarter, an 18% increase year over year. Besides security products, the revenue category also includes consulting and research, loyalty and reward program management, and data analytics.

What makes this quarter different, however, is that now there is evidence that this suite of products and services is not only giving revenue growth a shot in the arm, but also helping Mastercard secure new deals. These services can be extremely valuable to merchants and card issuers alike, as many of them fall far outside their circle of competence. As CFO Martina Hund-Mejean said during the conference call, "a lot of the banks ... have been grappling with a lot of these issues" but because Mastercard has "a fantastic digital suite of products" the company has been able to "call out some wins" the past two quarters.

The Foolish takeaway

Mastercard has shown a sustained ability to develop and acquire solutions that enhance its core payment network capabilities. These offerings so appeal to its core banking and retail clients that, over the past several quarters, Mastercard has been able to charge a premium for its services. While we have seen firsthand how this drives the company's revenue growth over the past several quarters, the fact that it is now helping Mastercard secure new deals should encourage shareholders.

Mastercard has been a winner for investors since first going public, rising an amazing 2,680% since its IPO in 2006. Recent investors have nothing to complain about either as its stock price has risen more than 33% over the past year alone. Despite the stock's tepid response since earnings were released, if this quarter's results are any indication, I do not believe that Mastercard is done providing market-beating returns for investors.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.