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visa vs mastercard stock

Between 2013 and 2022, the company averaged an operating profit margin of 65.5%. You would be hard-pressed to find many companies with operating profit margins this high. The good news for investors is that competition in the industry is light.

Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool owns shares of and recommends Mastercard and Visa. But the bottom line is, I think the bigger opportunity of these two for Mastercard is this is the company that pivoted more toward particularly the business-to-business payments sooner. It’s certainly invested more in building out that part of its business. But it has some advantages and the fact that it moves faster there. I think that could be advantageous and that alone for me was enough reason to rank it higher than Visa.

Mastercard denies report it plans to raise credit card fees – Yahoo Finance

Mastercard denies report it plans to raise credit card fees.

Posted: Tue, 05 Sep 2023 15:03:57 GMT [source]

We will discuss whether these two payments behemoths deserve a space in growth investors’ portfolios. We will also share whether investors should choose one or add both now. Our artificial intelligence scours the markets for the best investments for all manner of risk tolerances and economic situations. Then, it bundles them up in handy Investment Kits that make investing simple and – dare we say it – fun. Visa and Mastercard stock both beat the market over the past five years.

Dividend strength

Let’s look at how much we could sell these stocks for 3 years down the line. Let’s ignore the Covid-19 impact for the moment, and look at growth and profitability together. Assuming this growth trajectory continues for the next 3 years at current (2019) profitability, Mastercard could be looking at growing its EPS to $12.50. Even if the P/E shrinks from 39 to 30 (the lowest P/E seen in the last 5 years is 27.3), we may be looking at stock returns of nearly 22%-23% in 3 years.

The industry is still strong, with no signs of replacement coming soon. For a different, and more diversified approach, Q.ai takes the guesswork out of investing. Mastercard’s dividend per share in 2021 was $1.76 compared to its $1.00 dividend per share in 2018. On the other side, Visa 2021 dividend payout totaled $1.34 compared to the 2018 dividend payout of $0.88. When we review the dividend growth, Mastercard’s dividend has grown by $0.76 compared to Visa’s dividend growth of $0.46.

The companies’ Dividend and Dividend Growth

While the growth rates are similar MA retains 100% of their revenue as gross profit as there are $0 in costs of revenue. If this wasn’t the case, I would give V the point because they are growing at almost the same rate from a larger base which is harder to do but I am astonished that MA retains 100% of their revenue as gross profit. I am splitting the point and giving MA .25 and V .75 in this category. For this article, I am going to analyze V and MA’s income statements, balance sheets, cash flow statements, and their dividends. Across these four categories, I will be conducting an 18-point review of each company. I will be awarding 1 point for each category and determining which company I believe is the better investment by the end of the article.

  • The price-to-earnings valuation of both companies indicates there could be more upside in the stocks.
  • On a QoQ basis, Mastercard’s top line increased by +7% to $4,120 million in the most recent quarter, and this was better than sell-side analysts’ 4Q 2020 revenue forecast of $4,010 million.
  • History shows that expensive companies can remain expensive as long as they continue to earn higher returns on equity and post market-beating growth.
  • This is likely attributable to the stronger recovery in transaction volume in the US as compared to other parts of the world.

As an investor, I am looking to generate a return on my capital so this is an important aspect to review. The return on asset ratio is calculated by dividing the net earnings by total assets. V generated $10.87 billion in net income of $80.92 billion in assets. MA generated $6.41 billion in net income from $33.58 billion in assets. In the near future at least, analysts generally expect Mastercard to grow earnings per share at faster rate.

Revenue growth and profitability

But as Fool.com contributor Jason Hall explains to colleague Matt Frankel, CFP, in this Fool Live clip, recorded on Sept. 20, that might not be the only reason. Mastercard may make a major mistake, like buying the wrong company. After all, it is aggressively acquiring bolt-on names, like the recent deal for cybersecurity outfit Baffin Bay. There’s one distinct difference between these two companies, however, that makes a difference to investors. And this nuanced difference favors a position in Mastercard over Visa. On the contrary, MA shares trade at a 34X forward earnings multiple, just above its decade median of 29.5X.

  • The key risk factors for Visa and Mastercard are a slower-than-expected recovery in cross-border volume, and a longer-than-expected time for transaction volume to be restored to pre-pandemic levels.
  • Working exclusively as network processors, these two companies have a unique edge, but they operate differently.
  • Staying with ratio’s I also look at a company’s total cash and short-term investments to their total long-term debt.
  • Keep in mind that both companies report their annual report at different times of the year, but other than that, these metrics will be comparing which company is more robust on paper.
  • Hence, we are not so sure whether both players will help investors outperform the market moving forward.

In 2020 V generated $8.23 billion in levered free cash flow which is an increase of $1.34 billion (19.42%) over the past 5-years and $867.2 million (11.77%) over the past 3-years. V has had an average annual growth rate of 5.4% over the past 5-years and 6.66% over the past 3-years. MA generated $6.17 billion in levered free cash flow in 2020 which was an increase of $1.57 billion (34.19%) over the past 5-years and $353.4 million (6.08%) over the past 3-years.

Is Mastercard a Better Buy Than Visa?

It’s extremely hard to judge a company’s prospects based solely on its plans that rest on its current innovative announcements. Still, I would have to give Visa an edge on this criterion due to their Visa Eco Benefits program. Visa is in a powerful position to leverage its vast network of user transaction data. Therefore, it was not a surprise to see the company report 15% growth in its data processing segment. Visa’s new flows and value-added services have also continued to grow by a solid 20% year over year. This was driven by services such as Visa Direct, which enables real-time payments.

Warren Buffett Now Has $1.3 Billion Invested in This Consumer … – The Motley Fool

Warren Buffett Now Has $1.3 Billion Invested in This Consumer ….

Posted: Wed, 06 Sep 2023 12:00:00 GMT [source]

Cash App and Square parent Block sued Mastercard and Visa last month for allegedly conspiring to overcharge its Square processing platform for transactions. Another reason is that in Mastercard’s current Valuation, higher Growth expectations are already priced in compared https://investmentsanalysis.info/ to Visa’s Valuation. The reason for this being that Mastercard has a slightly higher P/E [FWD] Ratio of 29.73 when compared to Visa’s (P/E [FWD] Ratio of 27.33). As a result, a recession could affect Mastercard investors to a slightly higher degree than Visa investors.

As the evolution continues, both companies are innovative enough to grow in these emerging markets. Each company knows that investors want to know this information and provide it annually on their 10-K report submitted to the SEC. American Express is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool owns shares of and recommends Mastercard, Under Armour (A Shares), Under Armour (C Shares), and Visa.

visa vs mastercard stock

We think the market seems to have priced in their faster expected growth rates. Hence, we are not so sure whether both players will help investors outperform the market moving forward. MA and V clearly demonstrate the resilience in their business models. Both companies have already surpassed their pre-COVID revenues in their most important segments.

Investing

This means American Express has more exposure to potential defaults and customer losses. Visa (V) and Mastercard (MA) both land a Zacks Rank #3 (Hold) at the moment. It may be worth holding on to shares as both Forex tp stocks trade attractively relative to their past. Top and Bottom line growth are poised to continue at both financial services firms despite earnings estimate revisions slightly down from last quarter.

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