This Profitable Cash Flow Play Looks Ready to Move Higher in the Coming Year

While the stock market has shaken off the Omicron variant fears and the potential for rising interest rates impacting the economy, not every company has gone along for the ride. Some have had a poor performance, even as they’ve been doing well operationally.

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  • That’s creating an opportunity for investors to buy a strong, industry-leading investment that offers strong profitability and cash flow, and with it a worthy stock to buy now.

    One such play? Mastercard Corporation (MA). The credit card payment processing company operates in a high-profit-margin oligopoly.

    Despite reporting a 46 percent profit margin in the past year, and with earnings up 60 percent and revenue up 30 percent over the past year, shares should have been moving like gangbusters. Instead, they’re up a paltry 4 percent.

    It’s no wonder that analysts are taking a closer look at the company here, given its potential to make up for lost ground in the next few months.

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  • Action to take: Eventually the company’s high cash flows and profits will lead to a higher share price, as the company either buys back shares or increases its dividend. At current prices, shares yield just under 0.6 percent, but Mastercard has been growing its dividend hugely.

    For traders, the April $400 calls, last going for about $8.80, are an inexpensive way to play a move higher in shares in the coming months. The option stands a good chance of moving in-the-money, and traders can likely nab mid-double-digit profits or better.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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