I have shared my researches about the digital payment companies Visa Inc (NYSE:V) and Mastercard Incorporated (NYSE:MA) on separate days. In case you’ve missed them, you can check them out via the respective links below:

In this short post today, I would like to put these two companies side-by-side and compare which one makes a better investment – in terms of growth in their top- and bottom-line, debt profile, and dividend payout over the past five years, along with taking a look at their current valuations (based on their current traded prices) to find out which of the two is ‘cheaper’.

Let’s begin…

Total Revenue and Net Profit Growth

Total Revenue:

Visa Inc: Between FY2014/15 and FY2018/19, its total revenue went up from US$13,880m (in FY2014/15) to US$22,977m (in FY2018/19), a compound annual growth rate (CAGR) of 10.6%.

Mastercard Incorporated: Its total revenue grew from US$9,667m in FY2015 to US$16,883m in FY2019, a CAGR of 11.8%.

Net Profit:

Visa Inc: Over a period of five financial years, its net profit went up from US$6,328m in FY2014/15 to US$12,080m in FY2018/19, a CAGR of 13.8%.

Mastercard Incorporated: The company’s net profit saw growth over the past 5 financial years as well, where it went up from US$3,808m in FY2015 to US$8,118m in FY2019, a CAGR of 16.3%.

Conclusion:

In terms of its top- and bottom-line growth over the past 5 years, Mastercard Incorporated is a clear winner here.

Debt Profile

Visa Inc.: It is in a net debt position in 4 out of the 5 financial years I have looked at (the only year it was in a net cash position was in FY2014/15). For more details about Visa Inc.’s debt profile, you can check out my previous post about the company here.

Mastercard Incorporated: Unlike Visa Inc., the digital payment company is in a net cash position in all of the 5 financial years I have looked at – you can read more about Mastercard Incorporated’s debt profile in a separate post I’ve written here.

Conclusion: Again, Mastercard Incorporated is a clear winner as far as their debt profiles are concerned, as it is in a net cash position in all of the 5 financial years I have looked at.

Dividend Payouts to Shareholders

The management of both Visa Inc. and Mastercard Incorporated declares a dividend payout to their shareholders on a quarterly basis.

Visa Inc.: Its dividend payouts saw increases every single financial year, where it grew from 50.0 cents/share in FY2014/15 to 105.0 cents/share in FY2018/19 – a CAGR of 16.0% over 5 years.

Mastercard Incorporated: Its dividend payout to shareholders have also gone up every single year over the past 5 years – from 67.0 cents/share in FY2015 to 139.0 cents/share in FY2019 – a CAGR of 15.7%.

Conclusion: In terms of dividend payout growth over a 5-year period, Visa Inc. edged out (with a CAGR of 16.0% vs. 15.7% for Mastercard Incorporated.)

Current Valuations

The following table shows you the current valuations of the two digital payment companies based on their share prices as at market close on 22 September 2020:

Visa Inc.Mastercard
Incorporated
Share PriceUS$200.56US$335.31
P/E Ratio38.745.9
P/B Ratio14.551.9
*Dividend Yield0.5%0.4%

* The dividend yield is computed based on a total dividend payout of 105.0 cents/share for Visa Inc. in FY2018/19, and 139.0 cents/share for Mastercard Incorporated in FY2019.

As you can see from the table above, Mastercard Incorporated is the more ‘expensive’ company between the two – not just in terms of its share price, but also in its current valuations, where its P/E and P/B ratios are higher compared to Visa Inc.’s, and at the same time, its dividend yield is also lower.

In Conclusion

No doubt that Mastercard Incorporated is the more ‘expensive’ company (in terms of its valuations), but its growth (in its top- and bottom-line) over the past 5 years is better than Visa Inc.’s. Also, Mastercard Incorporated also has a better debt profile in that it is in a net cash position in all of the 5 financial years I have looked at.

But having said that, the past is not indicative of the future. Also, this post is by no means a recommendation to buy shares of Mastercard Incorporated. Please do your own due diligence before you make any investment decisions.

Disclaimer: At the time of writing, I am a shareholder of Mastercard Incorporated.

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