Credit Is The Devil…Right? Visa Inc (V), Mastercard Inc (MA), American Express Company (AXP)

Visa boasts a wide economic moat, $1.7 billion in credit, and is the single largest payment system in the world. Not only does Visa market their cards themselves, but it also licenses the Visa name to member institutions. These institutions market their own products through Visa which generates more income for both institutions. Visa is the only company that has seen increases every year for a decade. In 2012, the company brought in over $10 billion in revenue. With a market cap of $105 billion, its FCF yield is the second highest at 4.4%.

All of these companies have done very well in the past few years. Anyone invested in these companies should have seen positive returns, and even outperformed the S&P 500.

V data by YCharts

The Foolish Bottom Line…

30% of total household debt is derived from the use of credit cards. Annually, figures of American consumers inch closer to $1 trillion in total credit card debt, and these companies all seem to be doing pretty well. Discover, MasterCard, and Visa are all priced at a fair value in the 4% – 4.5% FCF yield, while American Express is a full percent higher.

The biggest disappointment with these companies is how they make money. America has to be in debt in order for these companies to survive. Any of these companies should continue to perform well in the future, despite it being a win-lose situation for their clients.

The article Credit Is The Devil…Right? originally appeared on and is written by Tyler Wofford.

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