Trying to decide between Visa (V 1.00%) and Mastercard (MA 1.04%) is tricky. Both businesses are growing exceptionally well and are positioned to take advantage of the continued war on cash.
In this Industry Focus: Financials clip, host Shannon Jones and Fool.com contributor Matt Frankel discuss which of these two could be the best value for investors right now.
A full transcript follows the video.
This video was recorded on July 30, 2018.
Shannon Jones: We've talked about Visa, we've talked about MasterCard, the million-dollar question here -- which one do you think, right now, is a better buy?
Matt Frankel: At first glance, both of these look kind of expensive. For me, they're almost the same business, so it comes down to a question of valuation and growth. Both stocks are up by over 700% over the past decade, just to give you an idea of how incredible this growth story has been. Visa has been up over 40% over the past year alone, MasterCard almost 60%. They trade at pretty high price to earnings multiples. Both are right around 39X as we're speaking.
But, given MasterCard is growing a little bit faster, I think, in my opinion, they're doing a little bit better job of investing in new technology. I would have to go with MasterCard.
By the way, those price to earnings multiples, don't let them scare you. If e-commerce keeps growing like this for another few years, if the rise of card payments worldwide keeps growing as predicted, those multiples could seem very cheap. But, for now, I would have to go with MasterCard, out of the two.
Jones: It's hard to bet against Visa, who's been the dominant market leader for so long. Really, I don't think you can go wrong with investing in both in this regard. The war on cash is really still in its early innings right now. You're going to see growth continue to pick up for both of them. I agree with you, Matt. I think, from the technology perspective, MasterCard, to me, is the better long-term growth opportunity. But, just like Buffett said at his most recent Berkshire Hathaway meeting -- he's a Visa shareholder, but he said, "Looking back, I could have bought MasterCard as well, and I really should have."
That is really the feeling around here, too, at The Fool. When you ask analysts, it's hard for them to choose one or the other, because they're such great, awesome companies. I really don't think you could go wrong with either.
Frankel: I'd go with MasterCard, but it's really tough to over-emphasize how close it is. If MasterCard was a 10, I'd call Visa a 9.9, in terms of attractiveness. It's really, really close. But, like I said, MasterCard, I like how they're growing, I like that they're focusing on the technology aspect of it and international markets. But you won't go wrong with either one of them. Don't sell Visa to buy MasterCard or anything like that.
Jones: You heard it here first, Fools! Both are great, MasterCard certainly doing its fair share to close that gap between it and Visa.
