If you're on a quest to build lasting wealth in the stock market, the secret is simple: Invest in high-quality companies and hold onto them for the long term. One of the most effective strategies is consistently growing your investment account over time and diversifying your holdings across various sectors.
The financial landscape is bustling with opportunities, especially among companies that provide important services to our economy. Think payment processing, transaction handling, and investment platforms -- these are vital players in the digital economy that continues to thrive.
Here are three no-brainer payments companies you can invest in for less than $1,000 today that can help solidify your portfolio.
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PayPal
PayPal (PYPL 1.41%), which traded at $310 per share in July 2021, has faced challenges in recent years. Today, the stock hovers around $80 and is priced at a reasonable valuation, presenting an intriguing opportunity for investors.
Despite a slowdown in growth and shrinking profit margins, PayPal remains the go-to digital payment app for consumers across all generations, according to a recent survey by The Motley Fool Ascent.
NASDAQ: PYPL
Key Data Points
Under the leadership of CEO Alex Chriss, who stepped into the top role about a year and a half ago, PayPal is looking to get back on track. Chriss has spearheaded initiatives to improve profitability and grow PayPal's higher-margin branded checkout options. One aspect of this is its PayPal Complete Payments Platform, which looks to cater to small and medium-sized businesses but has also attracted major players like Salesforce, Adobe, BigCommerce, and Shopify.
The company also has a trove of consumer spending data and will leverage that data to improve customer shopping experiences while helping merchants convert more sales. The company plans on using artificial intelligence (AI) to create targeted discounts and personalized customer recommendations based on customers' shopping experiences, which could give it another avenue for growth in the growing digital advertising industry.
PayPal is progressing and growing at a nice rate in the payment space. The company is also moving to reaccelerate growth across some key businesses. It is reasonably priced at 15 times this year's forecast earnings, making it a no-brainer buy today.
Visa
Perhaps no company is as dominant in the payments space as Visa (V 0.68%). According to data from The Nilson Report, in 2023, Visa had $12.6 trillion in total payment volume and had nearly 4.5 billion cards in circulation. To put this into perspective, runner-up Mastercard processed about 40% less payment volume, or $7.3 trillion, over that same period.
NYSE: V
Key Data Points
One compelling aspect of Visa's business is its robust payment network, which has taken over six decades to build up through a growing merchant and customer base. As more merchants accept Visa cards, customers can use them in more places, creating a flywheel effect. This growth cycle has enabled Visa to reinvest in its business, improve security, and scale up over time into the behemoth it is today.
Visa's overhead costs are low, and it is very efficient at generating profits. Over the last decade, Visa's profit margin has averaged 48%. It's also a cash-generating machine, raking in $18.7 billion in free cash flow over the past 12 months, which it can use to reinvest in the business or reward shareholders through dividends and stock buybacks.
V Profit Margin data by YCharts
One component of Visa's success is that it facilitates payments, earning a small fee as a percentage of every transaction. Unlike Capital One or American Express, Visa doesn't hold on to credit card debt. Instead, it partners with banks for its card products and lets them deal with the credit risk associated with them.
Visa is a rock-solid payments company that dominates the space -- making it an excellent no-brainer stock to buy and hold long-term.
Block
Block (SQ 1.56%) is another company that surged through 2021 amid the pandemic and boom in digital payments but is now down 72% from its all-time high price of $289 per share. The company has displayed strong growth across its top-line revenue, but ballooning costs weighed on it from 2019 through 2022, resulting in the stock's sharp sell-off.
Over the past year, CEO Jack Dorsey has breathed new life into the company to get it back on track. Dorsey's initiative is called the "rule of 40," and the goal is to get the company's gross profit growth plus adjusted operating margin to add up to 40% by 2026. It aims to improve margins and grow efficiently, creating more shareholder value in the process.
NYSE: SQ
Key Data Points
Block aims to better integrate all of its product offerings into one to achieve more efficient growth. Notably, Dorsey told investors that Block's ability to integrate Square and Cash App "enables us to provide consumer experiences others can't, specifically for commerce."
The company is making solid progress. In the third quarter, it generated $2.25 billion in gross profit, representing a 19% increase from the same period last year. It also brought in a net income of $284 million -- marking the fourth consecutive quarter of generally accepted accounting principles (GAAP) profit.
Block is making progress and executing its plans. Its cost-reduction efforts are bearing fruit as its bottom-line results continue to improve. Today, the stock is priced at a price-to-earnings ratio of 14.4 based on one-year forward earnings, which looks like an attractive entry point for long-term investors.
