Visa Inc (V), Mastercard Inc (MA), Discover Financial Services (DFS): Can The Gains In Payment Processing Continue?

MasterCard is similarly valued at 23.8 times earnings, and has also had a huge upside move over the past couple of years. The company is expected to grow earnings at almost the exact same rate as Visa Inc (NYSE:V), at just under 17% annually. MasterCard also has an even better cash pile than Visa, with over $5 billion in the bank.

Discover has had a similar gain, and happens to be the best dividend stock of the three, yielding just under 2% annually. Unlike the others, Discover trades at a very low 9.7 times TTM earnings, and is perceived as slightly riskier than the other two. However, the consensus calls for forward growth of just 8%, but I think this may be too conservative. Discover is beginning a partnership with PayPal this year, which will provide a mobile wallet to PayPal and its 117 million users, via Discover cards. If this catches on well, who knows how big it could be for Discover?

Is it Worth a Look?

Yes, but proceed with caution. At these high valuation levels, I would wait for more evidence of the credit markets thawing before jumping into Visa Inc (NYSE:V). Discover may be worth a look for those with a bit more risk tolerance, or for those who are more income-oriented, but I wouldn’t recommend it for a large investment. Out of the other two, with all of the numbers being almost equal, I would have to go with the brand recognition that goes with Visa.  Additionally, Visa is much more well-known internationally, and as mentioned, this is where I see most of Visa’s growth coming from in the years ahead.

The article Can the Gains in Payment Processing Continue? originally appeared on Fool.com.

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