Visa Inc. (NYSE:V) and American Express Company (NYSE:AXP) both put their logos on cards, and that is roughly where the similarity ends. One runs a toll road. The other lends its own money and runs a toll road as well.
That difference explains almost everything about how they are priced. Visa trades near thirty-one times its past year’s earnings. American Express trades near eighteen.
The question is whether the gap is a fair price for safety, or an overpayment for it.
READ ALSO: Jim Cramer Backs American Express (AXP) and Capital One (COF) as Consumer Spending Stays Strong
Visa Keeps Half of Every Dollar it Takes In:
Visa does not lend. It moves money between banks and charges a sliver of each transaction, which means it carries almost no credit risk and almost no marginal cost.
The result is a margin almost no company can match. Visa turned about $44 billion of revenue into roughly $22 billion of profit over the past year. Half of everything it collected reached the bottom line.
Growth has not slowed either. Revenue rose about 14% and earnings per share a little faster. For a business this size and this old, that is unusual.
It has also kept moving into the parts of payments that are changing. Visa has pushed into fraud prevention, stablecoin infrastructure and standards for AI-driven commerce, and agreed in August to buy the fraud detection firm BioCatch for $2.4 billion, a deal that has not yet closed.
The catch is what you pay. At thirty-one times earnings, a great deal of that durability is already in the price.
DON’T MISS: Visa (V) vs. Mastercard (MA): $2.4B BioCatch Acquisition Escalates the Payments Security War
American Express Takes the Credit Risk and Gets Paid for it:
American Express runs a closed loop. It issues the card, carries the balance, and operates the network, so it earns the lending spread as well as the fee.
That is why its revenue is far larger and its margin far smaller. Amex collected about $72 billion over the past year and kept roughly $11 billion, which is a fraction of what Visa keeps on much less revenue.
But the growth is there, and the price is not. Earnings per share rose nearly 16%, faster than Visa’s, while the shares change hands near eighteen times earnings and about sixteen times what analysts expect next year. Amex also pays a noticeably larger dividend than Visa.
The reason for the discount is honest enough. Amex owns the loans, so a weakening consumer hits Amex directly in a way it cannot touch Visa. Amex cardholders skew affluent, which has historically softened that blow without ever removing it. Jim Cramer has argued the opposite case, backing Amex while consumer spending stays strong.
Conclusion:
Visa is the better business and nobody serious disputes it. A company that keeps half of its revenue as profit, takes no credit risk, and still grows at this rate deserves a premium. However, Visa now costs well over half as much again for every dollar of earnings. American Express grows earnings faster, pays a larger dividend, and carries a valuation that assumes trouble it has not yet run into. On balance, American Express is the better buy today, for investors who accept that they are being paid to take consumer credit risk rather than avoid it. The number to watch is Amex credit provisions when it reports on October 23. If write-offs stay contained, the discount is hard to justify.
Market Sentiment:
Visa Inc. was held by 194 hedge funds with a combined stake value of about $35.4 billion at the end of Q2 2026 in the Insider Monkey database, up from 181 holders in the previous quarter. American Express Company was held by 85 hedge funds with a combined stake value of about $57.6 billion, up from 83 holders in the previous quarter.
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This article is originally published at Insider Monkey.
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