American Express Company (AXP), Mastercard Inc (MA), Visa Inc (V): Which of These Three Leading Companies Should You Buy

Even better is the forward P/E, which is projected at 17x, implying an EPS growth of approximately 39%. Tom Russo seems to acknowledge this as he expanded his position in MasterCard by 6%, buying 943,961 shares.

Is this the real leader ?

Although Visa Inc (NYSE:V) shows some features similar to Mastercard Inc (NYSE:MA), like the absence of debt, the outlook is not as promising.

On the positive side, Visa Inc (NYSE:V)´s Q1 surpassed expectations, posting EPS of $1.82, up from previous quarter´s $1.49, mainly due to a diminishing number of shares. The development of electronic payment methods places the company in a good position to seize opportunities for further expansion, helping it maintain the uptrend in transaction and payment volumes, both in the U.S. and overseas markets.

In addition, several acquisitions, including CyberSource, PlaySpan, and Fundamo, among others, widen Visa Inc (NYSE:V)’s product offerings and exposure to diverse high growth sectors like eCommerce and Mobile Commerce. Moreover, its strong cash position (about $1.3 billion in cash and cash-equivalents and no long-term debt) provides plenty of room for further purchases and consequent inorganic growth.

On the other hand, price is not convincing. A price close to its highest in 10 years, and P/B and P/S ratios of 4.77 and 12.37, respectively, are also quite discouraging. Also concerning is the divergence in cash flow from net income.

Pressure due to increasing regulation of the payment industry should be taken into account too, especially in some of Visa Inc (NYSE:V)’s key markets like China, Brazil, Canada, Australia, and the U.A.E.

Bottom line

Within the payment industry, risk cannot be avoided. However, looking at the companies’ fundamentals can help reduce risk. While all of the above analyzed enterprises offer some upside, the outlook is more promising for Mastercard Inc (NYSE:MA) than for its peers. Maybe, it’s a good idea to follow Tom Russo into this one.

The article Which of These 3 Leading Companies Should You Buy originally appeared on Fool.com and is written by Victor Selva.

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