Two titans of the payments and credit card industry, Visa Inc. (V Quick QuoteV - Free Report) and Mastercard Incorporated (MA Quick QuoteMA - Free Report) , dominate the global transaction processing market with staggering market capitalizations of $584.6 billion and $490.5 billion, respectively. Their influence extends beyond payments, shaping the very foundation of the global transaction ecosystem.

These industry leaders are not only driving innovation but also pioneering advancements in secure payment technologies. As economies become increasingly digital, their role in processing and protecting a significant share of global transactions becomes even more critical.

So, which stock — Visa or Mastercard — deserves a place in your portfolio for 2025? Let’s explore their unique strengths, challenges and growth prospects to help you decide.

V & MA Stock Performance Analysis

Mastercard shares have climbed 24.8% so far this year, outpacing Visa’s 20.7% rise and the Financial Transaction Services industry’s 22.6% growth. However, neither has managed to keep pace with the S&P 500’s 28.6% jump in 2024.

V & MA Year-to-Date Stock Performance

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Similar Earnings Surprise History

Visa and Mastercard share a pretty similar track record when it comes to earnings performance. Both companies beat earnings estimates in each of the past four quarters. While Visa has an average earnings surprise of 3.04%, Mastercard stands at 3.16%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

V & MA’s Stock Valuation Comparison

Visa holds a notable advantage over Mastercard in terms of valuation, with a significant gap between the two. Visa’s forward price-to-earnings (P/E) ratio stands at 27.36, making its shares more attractively priced than Mastercard's 32.90 multiple. Both companies are trading at a premium compared to the industry’s average P/E of 25.67, indicating investor confidence in their long-term growth prospects. However, Mastercard’s higher valuation exposes it to greater downside risk if regulatory hurdles, competition from fintech players or economic slowdown impact its earnings potential.

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V & MA’s Financial Health

Visa exited the September quarter with cash and cash equivalents of nearly $12 billion, which declined 26.5% from the fiscal 2023-end level. Its long-term debt amounted to $20.8 billion, up 1.8% from the figure as of Sept. 30, 2023. Meanwhile, Mastercard exited the third quarter with cash and cash equivalents of $11.1 billion, which climbed nearly 29% from the 2023-end level. Its long-term debt amounted to $17.6 billion, up 22.8% from the figure as of Dec. 31, 2023.

Visa’s long-term debt-to-capital of 34.74% is significantly lower than MA’s 70.23%. In comparison, the industry average currently stands at 39.43%.

In the trailing 12-month period, Visa generated operating cash flow of $19.95 billion, down 3.9% year over year. Meanwhile, Mastercard generated $14.08 billion during the same time, which grew 17.5 year over year.

Shareholder Value-Boosting Efforts

Both Visa and Mastercard, as leaders in profitability, focus on enhancing shareholder value through aggressive share repurchases and consistent dividend payouts. In the September quarter, Visa returned $6.8 billion to its shareholders, with $5.8 billion allocated to share buybacks and $1 billion paid in dividends. It had leftover authorized funds of $13.1 billion under its repurchase program as of Sept. 30, 2024.On the other hand, Mastercard bought back 6.3 million shares for $2.9 billion in the third quarter and paid out dividends worth $611 million. As of Oct. 28, 2024, it had a buyback capacity remaining at $5.6 billion.

Visa has a dividend yield of 0.75%, which is higher than the industry average of 0.66% and Mastercard’s yield of 0.50%. This positions Visa as a more attractive option for income-focused investors.

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V & MA’s Growth Prospects

Visa maintains a dominant position in the U.S. payments market, controlling 47% of all U.S. credit card balances and 52% of the total credit card market. Mastercard ranks second, with competition from other players significantly trailing behind. Both companies are also increasing their footprint in developing markets, positioning them for long-term growth.

Their network effects continue to drive expansion, and as more businesses and consumers adopt their services, their ecosystem becomes stronger. This increased adoption generates more revenues, which are reinvested into their networks, supporting sustainable growth. In the most recent quarter, Visa processed 61.5 billion transactions, a 9.9% increase year over year, while Mastercard processed 41.1 billion transactions, rising 10.6%. These numbers are expected to keep growing as their services gain more traction globally.

Visa and Mastercard’s diversified revenue models are also strong growth drivers. Their value-added services, such as cybersecurity and data analytics, differentiate them from the competition. Their massive scale allows them to invest heavily in R&D, enabling continuous technological advancements and product innovations, which solidify their positions as preferred payment providers.

Both companies are focusing on inorganic growth through mergers, acquisitions and partnerships to expand their global reach and capabilities. They are investing in emerging payment trends, including Buy Now, Pay Later (BNPL) services and cryptocurrency solutions, ensuring they remain competitive in an evolving payment landscape.

Visa & Mastercard’s Headwinds

Both Visa and Mastercard face challenges that could hinder their short-term growth prospects. These headwinds include rising operating costs, legal battles and regulatory changes that could create uncertainties for both companies. Visa’s adjusted operating expenses grew 16.2%, 11.7% and 10.8% in fiscal 2022, 2023 and 2024, respectively. The same for Mastercard grew 10.7% in 2022, 10.5% in 2023 and 9.9% in the first nine months of 2024.

Visa is currently embroiled in a major antitrust lawsuit filed by the U.S. Justice Department in September, which could result in significant financial liabilities. The company is also facing legal action in the U.K. regarding its interchange fees. Similarly, Mastercard is working to resolve a collective lawsuit in the U.K. related to its card fees, reaching an agreement in principle earlier this month.

The Credit Card Competition Act of 2023 could pose further challenges. This proposed legislation aims to promote competition in the credit card market and reduce costs for merchants, potentially impacting the duopoly Visa and Mastercard currently enjoy, especially in the U.S. market. The impact of such regulation could significantly alter the competitive landscape for both companies. In the Eastern Hemisphere, UnionPay remains a strong competitor.

Final Words: Not the Right Time to Buy V or MA

Visa and Mastercard, two of the biggest players in the global payments industry, have their strengths. Mastercard leads in stock performance this year, while Visa stands out with its stronger dividend yield, lower leverage and better valuation metrics among the two, making it appealing to income-focused investors.

However, both companies face headwinds in the near term. Valuation is relatively high for both stocks, and they are dealing with increasing expenses, lawsuits and regulatory challenges that could hinder their market positions and financial health.

While both companies maintain strong long-term growth potential, these factors suggest caution for those considering new investments. The outlook is currently neutral, and with a Zacks Rank #3 (Hold), it's not an ideal time to buy these stocks. Investors should closely monitor the developments in their legal and regulatory landscapes before making any decisions. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.