Visa Inc (V), Mastercard Inc (MA): Tuesday’s Top Upgrades (and Downgrades)

Adding to the riskiness of investing in these stocks, Visa generated less than half as much real free cash flow as it reported in net income last year — meaning its P/FCF ratio is well over 100. MasterCard, on the other hand, generated more free cash flow ($3.3 billion) than reported profit ($2.8 billion) — but that still gets the P/FCF ratio on that one down only to 21.

On balance, I have to say that I like the valuation at MasterCard much more than the valuation at Visa Inc (NYSE:V) — or perhaps I should say, I hate the valuation at Mastercard Inc (NYSE:MA) much less. That said, neither stock offers much potential for appreciation at today’s prices — and certainly not enough to justify the price target hikes that Oppenheimer is bandying about today.

Maybe that’s the reason both stocks are actually declining in midday Tuesday trading. Maybe investors can just spot bargains — or the lack thereof — better than the “professional” analysts can.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends MasterCard, Ulta Salon, Cosmetics & Fragrance, and Visa. The Motley Fool owns shares of MasterCard and Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA), Cosmetics & Fragrance.

The article Tuesday’s Top Upgrades (and Downgrades) originally appeared on Fool.com and is written by Rich Smith.

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