American Express Company (AXP), Visa Inc (V), Mastercard Inc (MA): Are the Credit Card Stocks Overvalued?

MasterCard is more reasonably valued than Visa, exchanging hands for 25 times trailing EPS, but that’s still a level I’d consider too high for prudent value investing.

I’m sure that all three of these companies will continue to grow sales and profits at strong rates going forward. But at a certain point, investors buying stocks at these levels are veering dangerously toward gambling on stock prices instead of making sound investment decisions.

While each of these companies are highly profitable and are sure to keep growing at decent rates due to the gradual economic recovery, I don’t consider these stocks to carry enough margin of safety to be buys at this point.

Robert Ciura has no position in any stocks mentioned. The Motley Fool recommends American Express, MasterCard, and Visa. The Motley Fool owns shares of MasterCard.

The article Are the Credit Card Stocks Overvalued? originally appeared on Fool.com and is written by Robert Ciura.

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