Which of These 2 Credit Card Giants Is Worth Your Money?

In the United States, four credit card networks bombard consumers with endless ad campaigns. Two of these, American Express (NYSE: AXP) and Discover Financial Services (NYSE: DFS), operate credit card segments but also have banking wings that add business complexity. Visa (NYSE: V) and Mastercard (NYSE: MA) only provide electronic payment solutions to businesses and consumers alike. Due to their focus on this segment, Visa and Mastercard are valued more richly than their other rivals. However, investors may find it difficult to discern which company is a better buy.

Looking at the stock price alone, one might find this statement puzzling. Visa trades around $220 while Mastercard is above $350 at the time of this writing. But investors shouldn't be concerned about the price per share. Instead, they should concern themselves with valuation metrics when determining which stock is a better value. From a trailing twelve months price-to-earnings standpoint, Visa trades at a 46 times multiple where Mastercard is at 49. Why does a spread exist for companies performing the same operation? It all comes down to growth.

Before the pandemic, Mastercard's revenue growth was larger than Visa's. Both companies earn a significant amount of money on cross-border transactions which decreased during the lockdown and a few months thereafter. Now that travel is beginning again, Mastercard is once again growing faster than Visa. Mastercard's revenue grew nearly 36% where Visa's increased 27% during their latest quarterly earnings. Growth comes at a premium, so Mastercard is given a higher valuation.

Source Fool.com