Which Credit Card Stock is a Better Choice?

Credit card use and spending continue to grow at a healthy clip along with strong consumer spending figures and less use of cash and checks. These companies have been outperformers and are likely to continue doing so this cycle especially as the consumer is in good shape.

This is evident through defaults being at record lows, household savings at record highs, and a strong jobs market. Betting on American consumers to keep spending more money has always been a winning bet.

Visa (V) and American Express (AXP) are two of the credit card industry’s top publicly traded companies. Let’s take a look at each of these stocks to determine which is the better play.

V

V is a worldwide payment tech business. V’s payment processing tech connects businesses with consumers, banks, and governments. V’s secure payment network might soon evolve with the addition of cryptocurrency. V’s brass has made it quite clear the company is exploring crypto opportunities.

V has a forward P/E ratio of 40.74. This elevated ratio indicates the stock might be slightly overvalued. V has a 0.99 beta so it probably won’t move much if the market significantly fluctuates.

V has a B POWR Rating. The stock has Bs in the Quality, Momentum Sentiment, and Stability components of the POWR Ratings. You can find out how V grades out in the Value and Growth components of the POWR Ratings by clicking here.

Of the 51 stocks in the Consumer Financial Services space, V is ranked just outside of the top five, slotting in at sixth. Investors who would like to learn more about the stocks in this sector can do so by clicking here.

The analysts are bullish on V, setting an average target price of $279.45 for the stock. If V hits this target price, it will have increased by more than 20%. Of the 45 analysts who have issued V recommendations, 14 consider it a Strong Buy, 27 consider it a Buy and four consider it a Hold.

AXP

AXP is a global payment services provider. AXP is the largest card issuer on the planet. The company’s premium network for card members who spend lavishly is lauded across the board. Furthermore, merchants credit AXP for helping to expedite growth through business-building services.

AXP’s forward P/E ratio of 18.88 is reasonable. This moderate ratio indicates AXP is fairly valued or possibly slightly overvalued. The stock has a low beta of 1.29 so it probably won’t make a major move unless the market goes absolutely bonkers in either direction. AXP is currently trading at $164 and change. The stock’s 52-week high is $179.67. AXP has a 52-week low of $89.11.

AXP has a C POWR Rating grade. This grade means AXP is a Hold. The stock has Cs in the Quality, Value, Growth, and Stability components of the POWR Ratings. Click here to find out AXP’s grades in the rest of the POWR Ratings components such as Momentum and Sentiment.

Of the 51 publicly traded companies in the Consumer Financial Services segment, AXP is ranked 17th. You can learn more about the stocks in this space by clicking here.

The analysts believe AXP is slightly underpriced. If the stock reaches the average analyst target price of $180.64, it will have increased by nearly 9%. The average analyst price target for the stock has increased by more than $51 in the prior 28 weeks. However, of the 28 analysts to have issued AXP recommendations, exactly half consider the stock a Hold, 10 consider it a Buy and four consider it a Strong Buy.

Which is the Better Choice?

V is the better of these two credit card plays. V has a B POWR Rating grade. AXP has a C POWR Rating grade. V is ranked in the top five of its segment. AXP barely ranks in the top 20 of the same category. Choose V and your investment stands a good chance of growing over time.


V shares were trading at $233.50 per share on Wednesday morning, down $1.03 (-0.44%). Year-to-date, V has gained 7.22%, versus a 19.47% rise in the benchmark S&P 500 index during the same period.

About the Author: Patrick Ryan

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More…

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