In the field of payment services, Mastercard ( MA 0.46% ) and its bigger competitor Visa ( V 0.59% ) Two stocks that are very popular among investors are considered favorites for a reason. These two companies dominate the payment processing sector, forming an important duopoly. extremely Successful companies. Specifically, Mastercard has achieved a net profit margin of 46% in the last four quarters.
As a value investor, Visa and Mastercard may appear overpriced despite their strong market position and consistent double-digit annual earnings growth. Both stocks are currently trading at high valuations, with Visa at 25 times forward earnings estimates and Mastercard at 31 times.
A more affordable financial technology company’s stock.
Similar to Mastercard and Visa, PayPal ( PYPL 3.54% ) A lucrative company in the payments sector is being undervalued compared to its competitors. Currently, PayPal is trading at a significantly lower valuation, at around 15 times forward earnings estimates, despite achieving a 17% year-over-year earnings growth in the most recent quarter. profit margins , and consistent expansion across the company.
PayPal’s stock is currently trading at a significant discount of around 78% from its highest point in 2021, and this is attributed to a specific cause. The substantial increase in user numbers experienced by the company during the pandemic period has sharply declined in 2022, leading to a halt in growth. However, PayPal has implemented strategies to facilitate a substantial recovery.
A great deal of promise
In the last year or so, PayPal has experienced significant changes in its leadership team. Not only did they appoint a new CEO, but also… Intuit Alex Chriss, the executive, has been performing excellently up to this point.
Instead, all executives at PayPal are new. The new chief people officer previously managed talent strategies for the company. Walmart The CTO is a former Walmart executive, and the new EVP and general manager also has a background with Walmart. SoFi The CFO has been replaced by the previous President, who is now the new chief product officer. Expedia Market. Here are some of the recent additions to the team. fintech PayPal has assembled a highly skilled team, with each member having joined their position within the last year.
Until now, Chriss and his team have been emphasizing efficiency, strategic allocation of funds, and introducing new innovations. Following a period of slower growth, both PayPal and Venmo have experienced consistent increases in the number of active accounts in the past few months. Chriss has also revealed plans for PayPal to initiate the construction of a new project. business related to promoting products or services This presents an intriguing opportunity for increased revenue generation.
PayPal anticipates a double-digit increase in adjusted earnings per share for the entire year, along with approximately $6 billion in revenue. free cash flow , all of which management intends to use for purchasing back shares, suggesting that the executives are of the opinion that the stock is currently undervalued. This is evident as the stock is trading at a price below 12 times its free cash flow.
The ultimate conclusion
Just to clarify, I am not stating that investors will definitely proceed. wrong Having either a Mastercard or Visa, or even both, is a great investment as they have the potential to generate high profits in the future. However, when considering the balance between risk and return, I currently find PayPal to be a more appealing option.
PayPal and Venmo remain as two of the most popular brands in personal finance, with loyal user bases. If the new management team effectively invests and leads the company to significant revenue growth, PayPal could offer substantial returns for long-term investors, especially considering its low valuation.
