Mastercard Inc. MA has completed the previously announced acquisition of Transfast, a global cross-border account-to-account money transfer network.
The acquisition will complement Mastercard’s existing suite of payment solutions. The deal would expand the company’s connectivity worldwide in the account-to-account space, enhance compliance capabilities and enable it to offer superior foreign exchange tools.
Transfast already supports the Mastercard Send solution for business-to-business (B2B) and person-to-person (P2P) payment services.
The deal will expand Mastercard’s cross-border business, which has been increasing over the years (17% in 2018, 13% in 2017 and 12% in 2016).
The buyout is also in line with the company’s focus on growing its presence in the B2B space. Recently, it launched Mastercard Track, which solves key challenges in the procure-to-pay process, including managing supply chain risk and creating more transparency in the B2B payments process. The company estimates $120 trillion in addressable payment flows in B2B globally.
Visa Inc. V is also making concerted efforts to grab a share of the vast cross-border business.
Businesses face immense challenges, in terms of higher costs, uncertainty, compliance requirements while making cross-border payments to their vendors. Transfast, along with Mastercard, will be a one-stop solution for these businesses.
Mastercard also remains focused on inorganic growth via buyouts as part of its long-term growth strategy. Acquisitions added 2% each in 2014 and 2015 to the company’s revenues. Though the contribution of the same to top line was meager in 2016, these buyouts added 2% to revenues in 2017 but drained net revenues by 2% in 2018. However, the acquisitions contributed 1.2% to the earnings per share in 2018.
In a year’s time, the stock has gained 36% compared with the industry’s rally of 25%.
The stock commands a premium valuation due to its strong growth trajectory, robust business model and a brand name with significant market share in the payment-processing industry. The stock is currently trading at forward 12-month price-to-earnings ratio of 32.85, higher than the industry’s P/E of 26.95. The company’s earnings for 2019 is expected to grow at 17.1%, compared with the industry’s average earnings growth of 12.7%.
The stock carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are EVO Payments, Inc. EVOP and Green Dot Corp. GDOT. Each of these stocks carries a Zacks Rank #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Both the companies surpassed estimates in each of the four reported quarters with an average positive surprise of 34.9% and 17.47%, respectively.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +98%, +119% and +164% in as little as 1 month. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Green Dot Corporation (GDOT) : Free Stock Analysis Report
Mastercard Incorporated (MA) : Free Stock Analysis Report
Visa Inc. (V) : Free Stock Analysis Report
EVO Payments, Inc. (EVOP) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research