What happened

Shares of Mastercard (NYSE:MA) gained 58.3% last year, according to data provided by S&P Global Market Intelligence. That compares to a return of 28.9% for the S&P 500 index.

The payment processor continued to post stellar growth rates on the top and bottom line. Investors see a long runway of growth for Mastercard in the war on cash. The enthusiasm for the company's prospects translated into a steadily increasing price-to-earnings (P/E) ratio for the shares as the year progressed. 

About half of the stock's return last year can be attributed to a higher P/E ratio. Mastercard stock started the year trading for an earnings multiple in the low 30s but ended the year at a P/E of 44. 

A wallet with cash and credit cards splayed out lying next to a smartphone.

Image source: Getty Images.

So what

Mastercard continued to expand relationships with existing bank and fintech partners, which is part of its strategy to cast a wide net for new cardholders. All the important metrics -- switched transactions (or the number of transactions processed), cross-border volume, and cards outstanding -- increased at healthy rates last year. 

In the third quarter, the company processed 20% more transactions than the year before. That translated to an increase in revenue and adjusted (non-GAAP) earnings of 16% and 23%, respectively, on a currency-neutral basis. 

Now what

Strong holiday sales should translate to another solid quarter when Mastercard reports fourth-quarter earnings. Analysts expect revenue and adjusted earnings to be up 15.4% and 20.6% year over year, respectively, in the holiday quarter. 

Growth is anticipated to slow somewhat in 2020, which may limit the stock's upside this year. Mastercard has a lot going for it, but at a forward P/E of 34 based on analysts' earnings estimates, investors may be getting a little too exuberant at current levels.