There are few companies in the world tied to consumers' financial health the way Mastercard (MA -0.01%) is. It processes an incredible $6.3 trillion worth of transactions each year, and therefore can be really sensitive to economic shocks that result in less consumer spending. The COVID-19 pandemic was probably as significant a shock as Mastercard could expect to see, but looking back, the company didn't perform too badly.

With a market capitalization of $372 billion at Wednesday's prices, Mastercard's stock trades near all-time highs. However, its recent gains owe more to multiple expansion than earnings growth. Right now, the stock trades at a significant 58 times trailing-12-month earnings. That's a little skewed because of the effects of the pandemic -- but the stock is richly priced based on expected earnings for 2022, too. If you're a Mastercard investor, what should you make of this valuation?

Young woman holding a smartphone and credit card, thinking

Image source: Getty Images.

The everything business

Investors are clearly willing to pay higher valuations for Mastercard as time progresses, and perhaps one of the reasons is because it has never been truly disrupted. The reality is, it's integrated with almost every bank in the world, and they have issued over 2.8 billion of the company's cards to consumers as of December 2020. It will be extremely difficult for new entrants to unseat such a dominant position, although new direct payment technologies like "Buy Now, Pay Later" are giving it a shot. Ultimately, the main competitor it has is Visa


Total Mastercard Payment Volume


$5.2 trillion


$5.9 trillion


$6.5 trillion


$6.3 trillion

Data source: Company filings.

Gross payment volume was growing nicely until the pandemic struck, although the effects were probably a lot smaller than expected in the early moments of 2020. Payment volume has returned to growth, though, with the first-quarter 2021 earnings report showing $1.7 trillion, up 8% compared to the same time last year. If that level remains consistent throughout the year, Mastercard stands to grow compared to both 2020 and its peak in 2019.

Emerging financial technology companies like Affirm have tried to bypass both Mastercard and the big banks, integrating directly with online merchants to facilitate payments (plus providing financing to customers). While very popular with consumers, this model so far has failed to generate meaningful profits, and some players -- like Australian company ZipPay -- have even partnered with Mastercard to deliver ''digital credit cards'' for their customers. So even as disruptors enter the payments scene, it turns out they greatly benefit from Mastercard's services and become customers as much as competitors. 

Truly global

The U.S. makes up just 31% of Mastercard's total net income -- it's a truly global business. Over $4.3 billion of the company's $6.4 billion is derived worldwide, so it puts the effects of the pandemic into perspective. For the full year 2020, Mastercard's cross-border transaction volume declined by a significant 29%, as less consumers could travel on account of border closures around the world.

In the first quarter of 2021, the company reported cross-border volumes down 17%, which is an improvement, but still markedly suppressed. The issue going forward is whether consumers will be able to move around the world during the U.S. and European summer -- and more importantly, whether they actually want to. Vaccination programs are ramping up, but countries like Italy are still under substantive lockdowns domestically, and are only just preparing to welcome tourists later in May.

With no opportunity to prepare or plan summer holidays, it remains to be seen if popular destinations will attract tourists, which would really impact Mastercard's ability to climb out of the cross-border volume crater left by COVID-19. Losing another summer could really stifle Mastercard's hopes for an earnings rebound. 

The bottom line

Mastercard has been consistently trading at an earnings multiple near 40, which is understandable given the powerful growth rate in earnings per share. 

Calendar Year

Earnings Per Share (Fully Diluted)

Share Price*


















As of May 5, 2021



57.7 (2020 earnings)


$7.92 (estimate)




$10.44 (estimate)



Data source: Calculated by author using company filings. *Share price and multiple captured on Jan. 31 following the respective full-year earnings reports. Estimated 2021 and 2022 earnings from Yahoo! Finance.

Looking at 2021 and 2022 estimates, the company seems fairly valued for the next two years unless it manages to blow out analyst expectations. This leaves some risk to the downside if it fails to meet them, so investors might be considering their risk versus reward when buying the stock at these levels. 

Mastercard's not the only payments provider with a slightly rich valuation, and this is likely the effect of ultra-low interest rates buoying the entire sector as the cost of money remains suppressed. 

Visa trades at 48 times earnings for the past 12 months, and 37 times consensus estimates for the next 12 months. Visa is a bit bigger than Mastercard, with a roughly $508 billion market cap and $11.6 trillion in gross transaction volume in 2019 (pre-COVID), with 3.4 billion cards issued. However, the companies operate very similar business models.

American Express, while in the same business as Visa and Mastercard, operates with a very different model. It issues cards directly to consumers rather than solely to third parties, and it also provides credit products. While still a large company at $125 billion, it attracts a lower current earnings multiple of 25 times trailing earnings and just 23 times forward estimates. The market typically attributes higher risk to finance companies, as they could pose significant downside during an adverse credit event. 

Looking ahead

Considering the historical valuation of Mastercard, and the fact that it seems close to fully valued through 2022 (assuming earnings estimates prove accurate), investors may want to think about the potential upside versus the opportunity cost of putting money elsewhere. While interest rates are low, which has boosted consumer spending, they could rise as the broader economy heats up.

For the company to deliver meaningful share price growth over the next two years, it might need to materially beat analyst expectations on earnings, through organic growth or increased market share. Without that, the stock could stagnate, and investors would need to be patient.