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

Risk and Volatility

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

Earnings & Valuation

This table compares Visa and Mastercard’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Visa $17.76 billion 13.30 $12.17 billion $2.69 38.41
Mastercard $11.42 billion 12.34 $6.61 billion $4.04 32.76

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.

Insider & Institutional Ownership

82.3% of Visa shares are held by institutional investors. Comparatively, 76.0% of Mastercard shares are held by institutional investors. 0.1% of Visa shares are held by insiders. Comparatively, 0.3% of Mastercard shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Dividends

Visa pays an annual dividend of $0.66 per share and has a dividend yield of 0.6%. Mastercard pays an annual dividend of $0.88 per share and has a dividend yield of 0.7%. Visa pays out 24.5% of its earnings in the form of a dividend. Mastercard pays out 21.8% 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. Visa has raised its dividend for 8 consecutive years and Mastercard has raised its dividend for 5 consecutive years. Mastercard is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a breakdown of recent ratings and price targets for Visa and Mastercard, as provided by MarketBeat.com.

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

Visa presently has a consensus target price of $104.73, indicating a potential upside of 1.37%. Mastercard has a consensus target price of $128.45, indicating a potential downside of 2.96%. Given Visa’s stronger consensus rating and higher possible upside, equities analysts clearly believe Visa is more favorable than Mastercard.

Profitability

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

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

Summary

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

About Visa

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.

About Mastercard

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.

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