Hence, we believe a high vaccination rate is the game-changer for international travel. More and more countries will begin to embrace COVID-19 as endemic. It will most certainly boost the recovery of international travel and spending. Therefore, leading payments players with massive cross-border revenues such as MA and V are primed to benefit.

  • For example, Visa enjoys a higher operating margin of 67% and a higher net income margin of 50.3% for the last 12 months.
  • Due to the difference in business models, Visa and Mastercard are about twice as profitable as American Express, although the return on equity across the group is relatively similar.
  • While Mastercard shares have enjoyed better price performance, Visa stock appears to offer a slightly better discount.
  • After all, the #1 stock is the cream of the crop, even when markets crash.

Mastercard’s FQ2’21 cross-border revenue of $1.08B is still well below FQ2’19’s $1.52B. In addition, Visa’s FQ3’21 international revenue of $1.7B also came in well below FQ3’19’s $1.98B. Our artificial intelligence scours the markets for the best investments for all manner of risk tolerances and economic situations.

Woven into fintech’s present and future

It noted that “in a downturn, debit is all generally preferred” as “people really want to spend the money that they have and avoid taking on extra burden in terms of additional debt.” Another example is that Visa is clearly interested in deals in the accentforex fx review B2C space. Visa is trading at a trailing P/E of about 31.8 times, versus Mastercard’s current P/E of around 34.3. Visa’s five-year average P/E is about 36 times, suggesting meaningful room for near-term upside despite the recent run-up in the shares.

  • MasterCard missed on revenues while Visa outperformed its revenue expectations.
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  • Among their new and innovative schemes, MA introduced their Mastercard Installments “Buy Now, Pay Later” (BNPL) program in September 2021, which delivers a choice to consumers at checkout.
  • Most merchants and restaurants are relatively low-margin businesses, and moving entirely to Solana Pay would increase their net margin by 2% to 3% in an instant.

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. MA has had an annual average growth rate of 6.79% over the past 5-years and 2.79% over the past 3-years. Next, I look at total assets is limefx forex broker worth your investment which includes everything from cash on hand, the patents a company holds, the plants and equipment and everything in-between. At the end of 2020 V had $80.92 billion in total assets which was an increase of $41.55 billion (105.53%) over the past 5 years and $12.94 billion (19.04%) in the past 3 years.

The United States is both organizations’ single biggest market, and Europe is second for both. 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. However, it’s important to note that Visa and Mastercard’s earnings estimate revisions have slightly trended down over the last 90 days. Visa’s current fiscal year 2023 earnings and revenue are forecasted to climb 10% and 9%, respectively. At Mastercard’s current stock price of $369.00, my DCF Model indicates an Internal Rate of Return of about 12% for the company.

Visa And Mastercard: A Showdown Between Two Of The Largest Credit Card Companies

According to a MA report, U.S. retail sales rose 8.5% during this year’s holiday shopping season, powered by soaring e-commerce sales. As consumers have been increasingly spending on discretionary items and services restrained by the COVID-19 pandemic, credit card transactions are rising. In addition, according to The Conference Board, the consumer confidence index came in at 115.8 points in December, up from an upwardly revised 111.9 in November. Strong consumer confidence is expected to translate into more purchases, leading to greater use of credit cards. Moreover, consumer spending is expected to remain strong in 2022, despite a resurgence in COVID-19 infections, high prices, and reduced fiscal stimulus. Prior to examining metrics, net income is the last category I look at on the income statement.

Most of us are a little too busy with our lives to dig into such details or to think philosophically about these things. But the U.S.’s (and Canada’s) credit and debit card market is pretty well saturated. Federal Reserve Bank reports that 77% of all adults living in the U.S. own a credit card, while 93% hold a debit card.

Visa: A Winner No Matter The Rising Delinquencies And Charge-Offs

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. The income statement provides insights into the company’s revenue, expenses and profits. Through solid analysis, I can visualize the previous trajectory of each segment and build a forecasting model for the future. Visa and other payment companies provide specialized toll roads (secured payment networks) that the money travels on and act as the equivalent of toll-booth operators.

Data processing fees are known as “switching fees,” which are a small, fixed cost per transaction charged to the issuer. Visa, Mastercard, American Express, and Discover are responsible for handling the majority of the world’s card payments. Visa and Mastercard present distinct offerings, as neither company is involved atfx forex broker review with extending credit or issuing cards. This means that all Visa and Mastercard payment cards are issued through some type of co-branded relationship. While the two companies don’t extend credit or issue cards, they do partner to offer the broadest array of products encompassing credit, debit, and prepaid card options.

Better Buy: American Express vs. Visa Stock

Mastercard had its IPO in 2006 with a share price of $39 and a market cap of $3.7 billion, while Visa had its IPO in 2008 with a share price of $44 and a market cap of $17.9 billion. 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. 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. Each company should also continue to benefit as cash continues to account for a decreasing portion of spending and commerce continues to migrate to digital channels.

Visa’s and Mastercard’s most recent quarterly financial results were above market expectations, and both of them also saw a significant improvement on a QoQ basis. The key differences between Visa and Mastercard lie with their mix of debit/credit card transactions, geographic exposure and relative emphasis on the B2C/B2B markets. Visa and Mastercard have been sharing dominance in the credit card industry for decades, so it’s no surprise that they share numerous similarities. However, while both look like solid long-term plays, one looks slightly better than the other. Additionally, investors might want to consider their entry point before establishing a strategy for one or both of these stocks. A lot of international markets that do have Mastercard and Visa acceptance, credit card acceptance in general is not nearly as universal as it is here.

V has a 5-year growth rate of 18.98% for its dividend while MA has a 5-year growth rate of 19.14%. Both Visa and Mastercard earn the majority of their revenue from service and data processing fees, but the two companies characterize these fees differently and have their own fee structures. According to the Federal Reserve’s 2020 Diary of Consumer Payment Choice survey, 42% of Americans preferred to pay bills with a debit card, while 29% used a credit card, meaning that 71% had at least one or the other. Many people have a number of them, seeking to take advantage of all the rewards, cash back opportunities, and promotional benefits that issuers offer. With V being a global payment leader, it is also unsurprising that the stock continues to trade at a premium compared to the fintech sector medians, though lower than its 5Y means. However, investors need not fret, since the stock’s valuations have merely normalized to its pre-pandemic averages.

A PEG ratio below 1 is often a sign that a stock is undervalued, and this metric supports the case that Mastercard is actually the cheaper of the two stocks despite carrying a higher forward earnings multiple overall. But there’s a reason that the market is willing to assign a higher multiple to Mastercard. Quick experiment, think about how many credit cards are in your wallet. I am willing to bet that you have a Visa
or Mastercard
credit card somewhere.