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

Institutional & Insider Ownership

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

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%

Volatility and Risk

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

Analyst Ratings

This is a breakdown of recent ratings and target prices for Visa and Mastercard, as provided by MarketBeat.

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

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 increased its dividend for 8 consecutive years and Mastercard has increased its dividend for 5 consecutive years. Mastercard is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings and Valuation

This table compares Visa and Mastercard’s 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.

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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