Globally, there’s still an estimated $18 trillion in consumer spending done in cash. That means there’s plenty of growth available in digital transactions. However, choosing between two companies that are so similar can be difficult. Beyond historical stock returns, there are a few differences to help investors choose. Visa and Mastercard are both respected, high-performing companies, with stocks that have crushed the market over the years.

V is estimated to increased its revenue by a CAGR of 13.5% over the next five years. Therefore, both companies are expected to post higher revenue growth moving forward. Notably, Visa is expected to grow even faster than its historical averages suggest. Importantly, both MA and V are expected to post faster EBITDA growth.

Visa and Mastercard’s Performance within the past 5 years

Below are comparisons of their financial performance, stock valuations and sentiment among Wall Street analysts. Visa Inc. and Mastercard Inc. are mature, stable companies in a hugely profitable business — payment processing. V took 3.75 points in round 1, 4.75 points in round 2, 1 point in round 3, and 2.5 points in round 4. Overall Visa came out ahead 12-6 throughout my 18 different categories across the income statement, balance sheet, cash flow statement and dividend metrics. Companies, which have a lower payout ratio, have the ability to provide dividend increases as less of their earnings are utilized to fund their dividend program. V has a payout ratio of 23.25% and MA has a payout ratio of 21.88%.

• One of the reasons for this is that I consider the company to be even stronger when it comes to Profitability.
• This allows me to understand a company’s results not just for the prior year or trailing twelve months (TTM) but over an extended period of time.
• Both companies have already surpassed their pre-COVID revenues in their most important segments.
• Visa relies far more heavily on the U.S. for revenue than Mastercard does, however, whereas Mastercard’s reach is stronger in Europe and the Asia Pacific region.

With a powerful toolkit, JR also provides insights into market sentiments, generating actionable market-leading indicators. In addition to tech and growth, JR also offers general stock analysis across a wide range of sectors and industries, with short- to medium-term stock analysis that includes a combination of long and short setups. Join the community today to improve your investment strategy and start experiencing the quality of our service. It’s expected to grow at a faster rate than its historical estimates. However, investors should take note that both players are currently trading at a significant premium above their 5Y historical mean.

Are Mastercard (MA) and Visa (V) Stock Buys Right Now?

The two questions I wanted to answer from my analysis were which company had the better financial metrics and would I invest in either company at today’s valuations. Based on my research and analysis I believe V has stronger financial metrics than MA. V has a market cap of almost $500 billion and its share price has increased by almost 180% over the past 5 years. V could certainly continue to appreciate in value but I would like to see a modest pullback before I would consider adding them to my portfolio. In the end, I believe V is a better investment but it’s not right for me at its current level. Sticking with assets I like to look at the return on asset ratio to see how efficient a company can utilize their asset base.

Shares of both Visa and Mastercard are virtually flat YTD Vs. the S&P 500’s -16%. In the last three months, Mastercard has risen +12% and Visa is up +10% to impressively outperform the benchmark. After the closing bell on Friday, August 25, Visa closed at $242.57, trading up by 1.28%, and Mastercard closed at $402.89, trading up by 1.30%.

Private Companies

V has had a 5-year annual average growth rate of 17.98% and 9.63% over the past 3-years. MA generated $6.50 in free cash flow per share in 2020 which was an increase of $3.19 (96.17%) over the past 5-years and $1.59 (32.38%) over the past 3-years. MA has a 5-year average annual growth rate of 15.55% and 11.33% over the past 3-years. Next, I look at total assets which includes everything from cash on hand, the patents a company holds, the plants and equipment and everything in-between.

That’s not quite the case elsewhere, where Mastercard enjoys a measurably better market share. Only 62% of people in the United Kingdom currently own a credit card, according to data from The World Bank, while in Germany the figure’s less than 57%. Sometimes the cash flow statement becomes overlooked as it is time consuming to review an income statement, balance sheet and read through presentations & earnings reports. https://investmentsanalysis.info/ The cash flow statement provides an immense amount of critical information as it illustrates how effective a company’s business operations are at generating cash. There is an old saying that cash is king and still to this day it holds true because a company that generates large amounts of cash has options. Gross profit is actually much closer than total revenue in my opinion because of 1 specific factor.

Visa vs. Mastercard: Which Credit Card Stock is a Better Buy?

Mastercard has been a little bit more aggressive when it comes to embracing new technologies, and like Jason said, that person-to-person and business-to-business payments. On the surface, Mastercard (MA -0.13%) and Visa (V 0.09%), look similar enough as companies. They’re both just credit card middlemen, collecting a small percentage of the transaction every time a customer makes a card-based purchase. There is a correlation between a high rate of dividend growth and excellent returns among stocks in the Dow Jones Industrial Average. Call me old fashioned but I liked to start with the company’s income statement. This allows me to understand a company’s results not just for the prior year or trailing twelve months (TTM) but over an extended period of time.

A recovery in cross-border volume is expected to be a key driver of Visa’s earnings growth in the quarters ahead. Visa announced its 1Q FY 2021 (YE September 30) financial results on January 28, 2021. Although the company’s top line and bottom line were both down YoY in the first quarter of fiscal 2021, Visa’s financial performance exceeded market expectations. I analyze Visa, Inc. in this section of the article by evaluating the company’s recent quarterly financial results and highlighting three key areas where V is differentiated from Mastercard Incorporated. In the current month, Visa announced the launch of the «Visa Eco Benefits» package, which it intends to roll out in 2022.

Visa vs. Mastercard: Which Is the Better Investment?

Moreover, many new FinTech players have emerged in the payments space recently. Notwithstanding, MA and V continue to dominate the payments space, both offline and online. Mastercard also generates more of its revenue from markets outside the U.S. The world is slowly moving to a cashless society, most countries around the globe are transforming in this regard.

Its main rival, Mastercard, is not actively offering promotions or incentives, or undertaking expensive ad campaigns to take market share. Visa emphasized at the KBW Payments FinTech Conference on February 23, 2021 that «we’ve seen a real shift from cash to Visa debit cards at the point of sale» in calendar year 2020. For investors seeking broad-based exposure to the financial services space, buying both Mastercard and Visa stocks could be the right move. Both companies have historically proven to be relatively recession resistant, and both are positioned to benefit from the long-term growth of the global economy.

• Mastercard’s Revenue Growth 5 Year [CAGR] of 12.22% is higher than Visa’s (9.98%).
• In 2020 V had $20.04 billion in cash and short-term investments which is an increase of $14.03 billion (156.93%) over the past 5 years and $6.69 billion (50.05%) over the past 3 years.
• American Express is a more complex business, but the stock is cheaper.
• 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’s ratio stands at 23.4% growth since last year, and Visa’s percentage growth has been 10.3%. Comparing the past three years for revenue growth, Mastercard financials have shown more growth. Notably, Mastercard’s financial performance in the most recent quarter was inferior to that of Visa, as Visa had a relatively narrower decline in its top line and bottom line as highlighted above. This is likely due to differences between the two companies, especially with respect to the mix of debit/credit card transactions and geographic exposure.

Since MA’s fiscal year is on a calendar year and V’s fiscal year ends in September, I am choosing to use each company’s 2020 fiscal year numbers as the cut off for this analysis. In a note to clients, Mizuho analysts led by Dan Dolev outlined several reasons investors should approach the reported fee increases cautiously Forex deposit bonus rather than joyfully. When we look at any investment opportunity — return is a key consideration apart from risk. Currently, Mastercard is trading at a P/E of 39 and Visa is trading at a P/E of 35, which implies that you’ll pay $39 for each dollar of Mastercard earnings vs $35 for each dollar of Visa’s earnings.

Financial Performance And Growth

They stand at share prices of $322 and $196, with market caps of $316.5 billion and $414 billion, respectively. Those are growth rates of over 8x and 4x in share price and over 85x and 23x in market cap within a margin of 15 years. The use of credit cards and other online payment methods has increased significantly over the past year, as people have relied more on digital modes of payments consistent with remote lifestyles. Despite increasing prices, retailers have reported solid sales because spending on services and discretionary items has increased significantly. Commerce Department, retail sales rose a seasonally adjusted 1.7% in October.