Mastercard Inc. (NYSE:MA) Fits the Caviar Cruise Stock Screen for Quality Long-Term Investing

The Caviar Cruise stock screening strategy helps find strong companies ideal for long-term, buy-and-hold investing. Based on quality investing principles—focusing on lasting competitive edges, solid profitability, and steady growth—the screen looks for firms with strong revenue and EBIT growth, high returns on capital, reasonable debt, and dependable cash flow. These factors guide investors toward businesses that can maintain strong performance over time.

One company that fits these strict standards is MASTERCARD INC - A (NYSE:MA). The payment technology leader displays many traits of a quality investment, making it a strong pick for investors using this approach.

Key Criteria and Mastercard’s Results

Revenue and EBIT Growth

The Caviar Cruise screen asks for at least 5% yearly revenue and EBIT growth over five years, confirming the company is growing sales and profits. Mastercard’s EBIT growth (5Y CAGR) of 11.15% easily meets this mark, showing its ability to grow efficiently. While the 5-year revenue growth figure isn’t provided, Mastercard’s recent 14.59% YoY revenue growth and projected 12.52% yearly revenue growth suggest solid momentum.

Better Profitability

A key part of quality investing is EBIT growth surpassing revenue growth, pointing to better margins from scale or pricing strength. Mastercard’s high operating margin (58.98%)—far ahead of peers—and steady profit trends show it performs well in turning sales into earnings.

Strong Return on Invested Capital (ROIC)

ROIC tracks how well a company earns profits from its capital. The screen looks for an ROICexgc (excluding cash, goodwill, and intangibles) above 15%. Mastercard’s ROICexgc of 190.14% is outstanding, ranking it among the best in its field. This highlights Mastercard’s capital-efficient model and its skill in reinvesting earnings at high returns.

Solid Financial Health

Quality firms should keep debt at manageable levels. The screen checks for Debt/FCF below 5, meaning debt can be paid off in five years using free cash flow. Mastercard’s Debt/FCF of 1.20 is excellent, showing a careful balance sheet and strong cash flow. Its Altman-Z score of 11.06 also signals very low bankruptcy risk.

High Profit Quality

The screen requires a 5-year average profit quality (FCF/Net Income) above 75%, confirming earnings are backed by real cash. Mastercard’s 101.14% ratio means it turns net income into free cash flow effectively, supporting the reliability of its profits.

Fundamental Analysis Overview

Mastercard’s fundamental report outlines its strengths:

• Profitability: Rates 7/10, with top-tier margins (44.93% net, 58.98% operating) and high ROIC.
• Growth: Past and expected earnings growth (~15%) matches quality investing goals.
• Valuation: The stock trades at a premium (P/E of 36), but this is fair given its growth and profits.
• Dividend: The yield is low (0.53%), but dividend growth (14.95% CAGR) and a safe payout ratio (19.15%) are positives.

Why Mastercard Suits Quality Investing

Mastercard’s global payments network, pricing strength, and recession-resistant model fit the less measurable qualities investors seek. Its lead in digital payments—a long-term growth area—further boosts its appeal.

Find More Quality Stocks

For investors looking for other stocks that meet the Caviar Cruise standards, the full screen results offer more ideas.

Disclaimer: This article is not investment advice. Do your own research or consult a financial advisor before investing.