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. 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.
Another thing to note is the dividend yield on American Express shares. The stock currently supports a yield of 1.6%, compared to 0.9% for Visa and 0.7% for Mastercard. While both stocks are part of a booming industry, it’s clear that Visa has better growth prospects.
Choosing between the two may come down to which stock suits investors’ portfolio strategy. Mastercard’s performance and growth trump Visa, while Visa’s stock appears to have the edge in valuation. Visa’s operating margins (earnings before interest, taxes and depreciation divided by net revenue) were better for both periods. Mastercard had much higher returns on equity, but its ratio of equity to assets was 18.2%, compared to 42.8% for Visa, as of March 31, according to FactSet.
While Visa is larger in terms of transactions, purchase volume, and cards in circulation, Visa and Mastercard have nearly identical global merchant acceptance footprints. Visa and Mastercard are the only network payment processors involved in all three areas of the payments market. Working exclusively as network processors, these two companies have a unique edge, but they operate differently. V is also more profitable with an EBITDA margin and net income margin of 69.09% and 51.07% compared to MA’s 57.51% and 45.50%, respectively.
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For credit cards and debit card users, Mastercard and Visa don’t determine the fees or APR on your accounts. Each creditor sets its own terms, so you can find the lowest fees by comparing multiple creditors’ products. You can also avoid most charges on your credit card by paying your balance in full before the due date each month. Visa and Mastercard credit cards offer some overlapping benefits, but most cardholder perks you want probably come from the card issuer itself. This means you’ll want to compare cards that operate on all payment networks, as well as options from card issuers such as Capital One, Chase, Citi, and Wells Fargo. At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors.
Mastercard places a stronger emphasis on the B2B market, and it sees more untapped opportunities in the B2B market as compared to the B2C market. It is also noteworthy that Mastercard is expanding its debit business. MA disclosed at the company’s recent results briefing that its “debit share in the U.K. from low single digits trading journal example to approximately one-third of the market” following recent wins. Both companies being giants in the credit card industry, offer stable returns in the long run when looking in from an eagle-eye view. Comparatively, innovation and future growth measures will dictate which companies do better, relative to the other.
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- If your credit card issuer switches networks, they’re required to send you a replacement credit card.
- That is, while Visa isn’t on the hook for soured credit card loans, weak economies don’t exactly inspire a great deal of consumer or corporate card-based spending.
- MA has gained 0.9% in price over the past month versus V’s negative returns.
Dividend lovers should keep their eye on Mastercard for that reason. This section is for any of my fellow dividend lovers and investors Harmonics trading who want to increase their dividend income. The good news is that both companies have consistently paid investors via dividends.
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. 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. The cash flow forex trading scams 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. For this article, I am going to analyze V and MA’s income statements, balance sheets, cash flow statements, and their dividends.
Visa vs. Mastercard: What is the difference?
In 2020 throughout the pandemic, V saw its revenue decrease YoY by -$1.13 billion (-4.92%). MA finished 2020 generating $15.30 billion in revenue which was an increase of $5.63 billion (52.28%) over the past 5 years and $2.80 billion (22.44%) over the past 3-years. MA had an average annual growth rate over the past 5-years of 10.13% and 7.73% over the past 3-years.
Many of these people, in fact, are looking for ways to wean themselves off the spending all these easy-to-get credit accounts seem to induce. The two companies — as well as their respective stocks — also sport comparable results for the past several years. They’re in the same business serving the same markets, after all. Mastercard has a Strong Buy consensus rating based on 21 Buys, two Holds, and zero Sell ratings assigned over the last three months.
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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. V has had an average annual growth rate of 30.96% over the past 5-years and 18.92% over the past 3-years. In 2020 MA had $10.60 billion in cash and short-term investments on the books which was an increase of $3.86 billion (46.29%) over the past 5-years and $2.81 billion (36.16%) over the past 3-years. MA has had an average annual growth rate of 10.88% over the past 5-years and 12.44% over the past 3-years.
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However, with more economies starting to “live with COVID,” we are sure it’s only a matter of time. Download Q.ai today for access to AI-powered investment strategies. When you deposit $100, we’ll add an additional $100 to your account. With a slight edge in employee ratings and the decidedly better governance practice of separating the chairman and CEO roles, Mastercard gets the edge in this category. It’s an advantage to have the highly respected, incredibly successful former CEO still involved as chairman of the board. The Value Pendulum is an Asian equity market specialist with over a decade of experience on both the buy and sell sides.
On the other hand, MA’s revenue and EPS have grown at CAGRs of 7.2% and 18.2%, respectively, over the past three years. The company’s revenue is expected to increase 22.2% for the quarter ending March 31, 2022, and 19.7% next year. Its EPS is expected to grow 31% for the quarter ending March 31, 2022, and 27.3% next year. Also, MA’s EPS is expected to grow at a rate of 26.2% per annum over the next five years. V’s revenue and EPS have grown at CAGRs of 5.4% and 8.4%, respectively, over the past three years.
Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations.
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. V – The use of credit cards and other online payment methods is rising as people rely more on digital modes of payment amid a hybrid lifestyle. So, credit card giants Visa (V) and Mastercard (MA) should benefit. The last category I look at on the balance sheet is the total equity to total asset ratio.
Additionally, Mastercard enjoys an operating margin of 56.8% and a net income margin of 44.7% for the last 12 months, while its free cash flow margin is an attractive 48.4%. While both companies exhibit attractive fundamentals and have been untouched by the banking crisis, Visa appears to look slightly better in the near term. For example, Visa enjoys a higher operating margin of 67% and a higher net income margin of 50.3% for the last 12 months. The company also has a higher free cash flow margin of 58.8% for the last 12 months. These stocks also offer modest dividends to reward patient investors.