Mastercard (NYSE: MA) and Visa (NYSE:V) are both large-cap business services companies, but which is the superior investment? We will compare the two businesses based on the strength of their earnings, risk, dividends, profitabiliy, analyst recommendations, institutional ownership and valuation.

Profitability

This table compares Mastercard and Visa’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Mastercard 38.30% 74.92% 23.61%
Visa 36.53% 30.95% 12.74%

Insider & Institutional Ownership

75.8% of Mastercard shares are held by institutional investors. Comparatively, 82.5% of Visa shares are held by institutional investors. 0.3% of Mastercard shares are held by insiders. Comparatively, 0.1% of Visa shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Valuation and Earnings

This table compares Mastercard and Visa’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Mastercard $11.42 billion 12.16 $6.61 billion $4.04 32.27
Visa $17.76 billion 13.07 $12.17 billion $2.69 37.73

Visa has higher revenue and earnings than Mastercard. Mastercard is trading at a lower price-to-earnings ratio than Visa, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Mastercard and Visa, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Mastercard 0 4 19 1 2.88
Visa 0 3 24 1 2.93

Mastercard currently has a consensus price target of $128.45, suggesting a potential downside of 1.48%. Visa has a consensus price target of $104.73, suggesting a potential upside of 3.19%. Given Visa’s stronger consensus rating and higher possible upside, analysts plainly believe Visa is more favorable than Mastercard.

Dividends

Mastercard pays an annual dividend of $0.88 per share and has a dividend yield of 0.7%. Visa pays an annual dividend of $0.66 per share and has a dividend yield of 0.7%. Mastercard pays out 21.8% of its earnings in the form of a dividend. Visa pays out 24.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Mastercard has raised its dividend for 5 consecutive years and Visa has raised its dividend for 8 consecutive years. Mastercard is clearly the better dividend stock, given its higher yield and lower payout ratio.

Volatility & Risk

Mastercard has a beta of 1.17, meaning that its share price is 17% more volatile than the S&P 500. Comparatively, Visa has a beta of 0.94, meaning that its share price is 6% less volatile than the S&P 500.

Summary

Mastercard beats Visa on 9 of the 17 factors compared between the two stocks.

Mastercard Company Profile

MasterCard Incorporated is a technology company that connects consumers, financial institutions, merchants, governments and businesses across the world, enabling them to use electronic forms of payment. The Company operates through Payment Solutions segment. The Company allows user to make payments by creating a range of payment solutions and services using its brands, which include MasterCard, Maestro and Cirrus. The Company provides a range of products and solutions that support payment products, which customers can offer to their cardholders. The Company’s services facilitate transactions on its network among cardholders, merchants, financial institutions and governments. The Company’s products include consumer credit and charge, commercial, debit, prepaid, commercial and digital. The Company’s consumer credit and charge offers a range of programs that enables issuers to provide consumers with cards allowing users to defer payment.

Visa Company Profile

Visa Inc. (Visa) is a payments technology company that connects consumers, merchants, financial institutions, businesses, strategic partners and government entities to electronic payments. The Company operates through payment services segment. The Company enables global commerce through the transfer of value and information among the participants. The Company’s transaction processing network facilitates authorization, clearing and settlement of payment transactions and enables to provide its financial institution and merchant clients a range of products, platforms and value-added services. The Company is a retail electronic payment network based on payments volume, number of transactions and number of cards in circulation. Its products/services include core products, processing infrastructure, transaction processing services, digital products, merchant products, and risk products and payment security initiatives.

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