Mastercard Inc (MA), Visa Inc (V): A Global Card Issuer for Long-Term Shareholders

MasterCard seems to deserve the highest valuation because of its highest profitability level. In the past 12 months, its return on invested capital was the highest of the trio, at 43.1%, while Visa’s ROIC was much lower, at 20.5%.

Business expansion

For the card-issuing business, it’s all about the network. Both Visa and MasterCard have been competing with each other vigorously to expand their business footprints in new markets. Visa has come to Africa with the payment network in Rwanda, while MasterCard was the first credit-card company to enter the Myanmar market. Those two companies also try to grow their businesses alongside the rising trend of online shopping demand. Visa has V.me, the digital wallet service with more than 50 additional financial-institution partners, while MasterCard partners with ING for the testing of the new EMV Internet Payments using mobile phones.

Indeed, Visa and MasterCard are the two best stocks for the fast-growing cashless transaction trends despite their current high valuations. I like MasterCard more, due to its much higher profitability, the opportunity to expand the business outside of the U.S., and the growing network with banks and merchants.

My Foolish take

MasterCard could be a decent long-term pick for patient shareholders. With a extremely high profitability, a global leading position and a growing operating performance, MasterCard could deliver nice returns for shareholders for a very long period of time.

Anh HOANG has no position in any stocks mentioned. The Motley Fool recommends American Express, MasterCard, and Visa. The Motley Fool owns shares of MasterCard.

The article A Global Card Issuer for Long-Term Shareholders originally appeared on Fool.com and is written by Anh HOANG.

Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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