Visa Inc (V), Mastercard Inc (MA), American Express Company (AXP): Three Stocks for a Cashless Future

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American Express

Meanwhile, American Express Company (NYSE:AXP) is not a pure payment processor like Visa Inc (NYSE:V) or MasterCard. The company has its own financial arm that assumes the debt and responsibilities of its customers. Therefore, American Express is often considered a more premium, exclusive card for affluent customers.

During the first quarter, American Express Company (NYSE:AXP) earned $1.15 per share, or $1.26 billion, on revenue of $7.88 billion. The company’s net income and revenue rose 2% and 4%, respectively, from the previous year. Just like MasterCard, American Express topped earnings estimates of $1.13 but fell short on revenue expectations of $8.0 billion.

This was a continuation of a year-long trend of soft revenue growth. Card member spending rose 7% after foreign currency adjustments, marking the fourth consecutive quarter of single-digit growth following nine quarters of double-digit growth. American Express Company (NYSE:AXP) is also often used for corporate expense accounts from large companies, and these accounts have now come under greater scrutiny as companies seek ways to reduce expenses and preserve margins. Approximately a quarter of American Express’ U.S.-billed business comes from corporate customers.

American Express Company (NYSE:AXP) has the lowest delinquency rate of all of the major credit card companies, but it still has to set aside a loan loss provision like banks to cover bad loans. During the quarter, the company set aside $497 million to cover bad loans, up 21% from the prior year.

The Foolish Bottom Line

In conclusion, let’s compare these three companies side by side to find the better value.




Forward P/E





5-year PEG





Price to Sales (ttm)





Return on Equity (ttm)





Debt to Equity





Profit Margin





Dividend Yield





Visa




19.53



1.24



10.39



8.77%



No debt



22.46%



0.80%




MasterCard




17.87



1.16



9.18



43.07%



0.74



37.33%



0.40%




American Express




12.98



1.17



2.52



23.16%



310.53



15.12%



1.20%




Advantage




American Express



MasterCard



American Express



MasterCard



Visa



MasterCard



American Express

Source: Yahoo Finance, May 2

Although Visa Inc (NYSE:V) initially seems like a good value based on top and bottom line growth, the stock is getting slightly overheated and is likely to pull back soon. Its rival Mastercard Inc (NYSE:MA) might be a better bet for value investors, since it has cheaper valuations and higher margins. Meanwhile, American Express is a good choice for longer-term value investors, and has the best dividend yield of the three. However, investors should keep in mind that American Express Company (NYSE:AXP)’ financial arm nearly sank the company during the 2009 crisis.

Investors should keep an eye on all three companies, since the rise of a cashless society propelled by e-commerce is making credit companies excellent long-term investments, regardless of short-term headwinds.

The article 3 Stocks for a Cashless Future originally appeared on Fool.com and is written by Leo Sun.

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