The foreign exchange effect is small, but should affect Visa’s revenue growth by at least 1% - 2%. A small change in revenue and net income growth due to currency effects could have a negative impact on investor sentiment. Since Visa trades at such a high multiple, any loss of growth could affect the price of the stock.
Mastercard Inc (NYSE:MA) is a growing player internationally, and while its track record, brand, and positioning are not as impressive as Visa, its earnings multiple is fairly high (23.79 P/E). Currency market fluctuations will probably impact the growth of MasterCard. I anticipate MasterCard to meet analyst expectations of 15.30% growth for the previous quarter, but it is unlikely that MasterCard will be able to report a blowout quarter due to the currency market fluctuations.
American Express Company (NYSE:AXP) has been able to report a fairly strong quarter. Analysts were anticipating declining growth, and American Express met those lower growth expectations (no surprise). The credit card business is maturing, and while it is unlikely that it will go away anytime soon, it is no longer generating a 25% annual growth rate (previous five years).
American Express offers a steady dividend yield of 1.2%, with growth rates projected to be 12% for the next five years. So, if your investment objectives coincide with American Express: steady yields and growth, than you should consider buying the stock.
The article Why You Might Buy This Company Despite Forex Fluctuations originally appeared on Fool.com and is written by Alexander Cho.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.