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Are Mastercard (MA) and Visa (V) Stock Buys Right Now?

Mastercard MA and Visa V shares have rallied nicely off their October lows after both slightly beat Q3 earnings expectations. At the moment, Mastercard stock is only 9% off its 52-week highs and Visa is trading 7% from its highs.

Let’s see if a continued rebound is in the cards and check if investors should consider buying either of the stocks.

Recent & Historical Performance

Shares of both Visa and Mastercard are virtually flat YTD Vs. the S&P 500’s -16%. In the last three months, Mastercard has risen +12% and Visa is up +10% to impressively outperform the benchmark.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Hopes of a continued rebound are supported by both stocks’ historical performance. Over the last decade, Mastercard’s total return is +702% to beat Visa’s +527%. Both stocks largely outperformed the benchmark’s +258% during this period.

Pivoting to valuation will give a better idea if the recent rally in these equities can be sustained and possibly provide investors with the stellar returns seen over the last decade.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Valuation

Visa has a “B” grade for Value in Zacks Style Scores system with Mastercard at a “C”.

Visa stock currently trades at 26.1X forward earnings, and nicely below the decade-high of 44.1X. This is also beneath the median of 27.7X during this period.

On the contrary, MA shares trade at a 34X forward earnings multiple, just above its decade median of 29.5X. However, this is beneath its decade-long high of 55.2X.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

While Mastercard shares have enjoyed better price performance, Visa stock appears to offer a slightly better discount. The price-to-earnings valuation of both companies indicates there could be more upside in the stocks. 

Growth Estimates  

Turning to growth will help justify a further rebound. Visa’s current fiscal year 2023 earnings and revenue are forecasted to climb 10% and 9%, respectively.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Mastercard’s earnings are projected to jump 26% in FY22 with sales expected to rise 17% as shown in the charts below.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Both companies continue to have solid growth trajectories. However, it’s important to note that Visa and Mastercard’s earnings estimate revisions have slightly trended down over the last 90 days.

Bottom Line

Visa (V) and Mastercard (MA) both land a Zacks Rank #3 (Hold) at the moment. It may be worth holding on to shares as both stocks trade attractively relative to their past. Top and Bottom line growth are poised to continue at both financial services firms despite earnings estimate revisions slightly down from last quarter.

These stocks also offer modest dividends to reward patient investors. Choosing between the two may come down to which stock suits investors’ portfolio strategy. Mastercard’s performance and growth trump Visa, while Visa’s stock appears to have the edge in valuation.

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Mastercard Incorporated (MA) : Free Stock Analysis Report

Visa Inc. (V) : Free Stock Analysis Report

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