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.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
