The broader financial sector has taken the brunt of recent market volatility with bank stocks falling sharply today and the XLF Financial Select Sector ETF down over -1%.
Amid the selloff among financials, investors may be watching American Express AXP, Visa V, and Mastercard MA to see if better opportunities become available to buy stock in these credit card and transaction services giants.
With all three stocks down over -1% today, let’s see if recent market volatility has indeed created a better opportunity and if now is a good time to buy.
Recent Performance
Despite the recent pullback, Mastercard and Visa stock are still up +30% and +23% respectively to outperform the S&P 500’s +13% and easily top American Express shares’ virtually flat YTD performance.
However, over the last three years, American Express’s +45% total return including dividends has led Mastercard’s +16% and Visa’s +15% while topping the benchmark as well.
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Dividend Comparison
As alluded to in American Express’s stellar total return over the last few years its 1.61% annual dividend yield currently tops Visa’s 0.78% and Mastercard’s 0.58%.
American Express’s dividend also beats the S&P 500’s 1.49% average while its peers trail the benchmark in this regard.
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Outlook & Valuation Comparison
Checking the valuations of these credit card giants may be most important as the outlook of all three companies remains attractive and they are expecting double-digit percentage growth on their top and bottom lines in fiscal 2023 and FY24.
In terms of their price-to-earnings valuation, American Express also stands out trading at a 13.4X forward earnings multiple and 32% below the S&P 500’s 19.8X. However, American Express’s annual earnings estimates are slightly down over the last quarter making this steep discount less compelling.
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While not at a far stretched premium to the benchmark, Visa’s stock trades at 26.7X forward earnings and nicely beneath Mastercard’s 32.6X.
Furthermore, it’s very noteworthy that Visa’s FY23 and FY24 earnings estimate revisions have remained higher over the last quarter offering further support to its reasonable P/E valuation while Mastercard’s FY23 EPS estimates are slightly down but FY24 estimates are modestly higher.
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Bottom Line
American Express stock is certainly compelling in many aspects but currently lands a Zack Rank #3 (Hold) along with Mastercard shares while Visa’s stock sports a Zack Rank #2 (Buy) in correlation with the trend of positive earnings estimate revisions.
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Free: See Our Top Stock And 4 Runners Up
Mastercard Incorporated (MA) : Free Stock Analysis Report
Visa Inc. (V) : Free Stock Analysis Report
American Express Company (AXP) : Free Stock Analysis Report
Financial Select Sector SPDR ETF (XLF): ETF Research Reports
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