3 Trends MasterCard Investors Should Be Excited About

The payment processing business is all about global commerce. When people the world over buy goods and services, each transaction represents an opportunity for these companies to make money.

That's a huge market, and it's one of the reasons whyMasterCard has performed so well during the past few years. Here are three other trends that give me confidence in the company's continued success in a challenging and uncertain global marketplace.

MasterCard's growth numbers are ridiculous Adjusting for currency fluctuations, MasterCard's net revenues increased 7% year over year. That's pretty strong growth in today's global economy, but that alone doesn't do MasterCard justice.

In MasterCard's growth markets outside of the U.S., gross dollar volumes of MasterCard transactions grew 16% from the 2014 second quarter. There are 2.2 billion MasterCard branded cards in circulation, up 8% year over year.

There were 12 billion transactions on the MasterCard processing network in the second quarter. That's 1.4 billion more transactions that in the second quarter last year.

Why are these metrics so important? Because MasterCard makes its money by charging a fee every time a MasterCard-branded credit or debit card is used all over the world. The more cards, the more dollar volume; and the more transactions, the more money MasterCard makes.

Part of the reason behind the growth is the company's success signing new partnerships with other companies to mutual benefit. Virgin Money signed with MasterCard in the UK in the second quarter, giving MasterCard 100% of the company's debit and credit card business. MasterCard also signed a new deal with TD Bankto convert their debit card portfolio to MasterCard's routing infrastructure. Barnes and Noble, Anne Taylor, Brooks Brothers, and Spirit Airlines all inked deals to stay as co-branded partners with MasterCard in the quarter.

All that growth is translating into earnings. Again adjusting for currency fluctuations, MasterCard reported that diluted earnings per share grew 15% year over year. That number also excludes a one-time charge related to a litigation settlement in the U.K. during the quarter. Net income rose 12% on the same adjusted basis.

MasterCard is very active acquiring companies with new technologies to boost existing products, as well as those with innovative solutions to expand and improve the MasterCard brand. Those acquisitions take some time to integrate into the operations of the company, and can sometimes have a drag on operating margins. That was the case in the second quarter, with operating margins shrinking from 58.4% in the 2014 second quarter to 54.9% this year.

Adjusting those acquisition-related expenses out on a projected basis, the company calculates that core, ongoing operating expenses rose only 4% year over year. In light of the company's rocket-engine growth rate, that 4% rise in expenses is fantastic. If the trend holds true, MasterCard should be able to improve margins steadily over time, meaning more and more of that strong growth will translate straight to bottom-line results.

Management is confident about the future The global economy has been thrust into a bit of a lurch during the past few months, in large part driven by a few critical markets where MasterCard has pinned its future. MasterCard's management isn't overly worried. In fact, they seem to have it more or less under control.

The Chinese yuan has devalued considerably, impacting the company's planned expansion in China next year, and existing business in other parts of Asia and the Pacific. Likewise, the Brazilian real has been on a steady decline against the U.S. dollar for months now because of serious economic concerns for the South American giant.

Global gross domestic product is projected to stay at or around 3% for the foreseeable future. U.S. GDP remains below 3%. Growth in the Chinese economy has cooled off considerably.

Equity markets all over the world have been turned upside down at all these signs and signals of a downturn. But cool as the other side of the pillow, MasterCard executives have kept their performance objectives and expectations on course for the rest of the year.

On the second-quarter conference call last month, MasterCard CFO Martina Hund-Mejean confirmed for analysts that the company's currency-adjusted guidance for three-year net revenue growth will be at a compounded annual growth rate between 11% and 14%. She also confirmed that the company still expects 20%+ CAGR for earnings per share over the same period.

This confidence speaks to the company's efforts with mobile, the growing number of cards in circulation, and the momentum of its operations in the emerging markets.

Filter the noise, and remember the long term. During the last five years, MasterCard has outpaced the S&P 500 by about four times. That outperformance has everything to do with the company's massive growth, earnings, and disciplined management. With all the challenges facing the global economy, there's no guarantee that the future of MasterCard will be able to match the past.

However, the future of commerce is digital payments, and MasterCard is one of the leaders in this technology. Whatever happens with the Chinese economy, the Brazilian real, or global GDP during the next 12 months won't change that.

I have confidence in the company, its products, and its management team that MasterCard will be just fine over the long term.

The article 3 Trends MasterCard Investors Should Be Excited About originally appeared on Fool.com.

Jay Jenkins has no position in any stocks mentioned. The Motley Fool owns and recommends MasterCard. The Motley Fool owns shares of Barnes & Noble. The Motley Fool recommends Spirit Airlines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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