In the midst of the banking sector sell-off, investors may be keeping an eye on American Express AXP, Visa V, and Mastercard MA to see if better opportunities to purchase stock in these leaders in credit cards and transaction services arise.
With today’s significant decline in bank stock prices and the XLF Financial Select Sector ETF down more than 1%, the wider financial sector has been hit most by recent market turbulence.
Let’s examine if today’s market decline in all three equities has actually improved the situation and whether it is a good moment to purchase.
New Performance
Despite the recent decline, the shares of Mastercard and Visa are still up 30% and 23%, respectively, outperforming the S&P 500’s +13% and American Express’s nearly flat YTD performance.
However, during the past three years, American Express has outperformed the benchmark and surpassed Mastercard and Visa with a total return of +45%, including dividends.
Comparing Dividends
American Express’s outstanding overall return over the past several years has made reference to the fact that its 1.61% annual dividend yield now outpaces Visa’s 0.78% and Mastercard’s 0.58%.
While its competitors lag below the benchmark in this area, American Express’ payout also outperforms the S&P 500’s average dividend of 1.49%.
Comparing the outlook and valuation
American Express also stands out in terms of its price-to-earnings value, trading at forward earnings multiple of 13.4X, which is 32% less than the 19.8X of the S&P 500. However, this significant discount is less tempting because American Express’s yearly profit projections are significantly lower than they were last quarter.
Visa’s stock trades at 26.7X projected earnings, which is comfortably below Mastercard’s 32.6X and does not represent a material premium to the benchmark.
Furthermore, it’s important to note that while Mastercard’s FY23 EPS forecasts are somewhat lower FY24 expectations are slightly higher, Visa’s FY23 and FY24 earnings estimate revisions have remained higher over the last quarter, adding support to its acceptable P/E value.
To sum up
While Visa’s stock presently has a Zack Rank #2 (Buy) in line with the pattern of favorable earnings estimate revisions, American Express stock currently has a Zack Rank #3 (Hold) with Mastercard shares.
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