Neither company is struggling like American Express is though. Both of the companies are posting gains, while credit card companies like AmEx are declining in popularity. Why is this happening? Well, the trends point to one reason and one reason alone. American Express is still clinging to the traditional ways to pay while Visa and PayPal are making strides for people to be able to pay differently.
What is the Value of Visa and PayPal?
Over the past year or so, Visa has shown a total return of 20 percent and PayPal has shown to be up 6 percent since July of last year.
PayPal hasn’t been trading all that long as a separate company, however, it seems that it will continue to climb the ladder where value is concerned. If you only take a simple surface look at the cost of each in the stock market, PayPal is seemingly more expensive. PayPal is earning in multiples of 39 versus the 28 Visa is currently sitting at.
Where returns are concerned, Visa seems more expensive. The credit card company’s shares trade at 24 times the earnings estimates, while PayPal trades at 22 times earnings.
Both Visa and PayPal have benefits when it comes to buying shares of the company on a value basis. However, what are the other factors that come into play when looking at these two “ways to pay.”
Visa and PayPal Dividends
When it comes to comparing dividends of each company, PayPal hasn’t returned much capital to its shareholders. However, there is still room for growth (which is exciting for many who dabble in stock).
Visa, however, has the edge over PayPal when it comes to dividends. The company, which has been traded since 2008, only has an edge over PayPal because its simply been traded longer. In reality, the stock only yield 0.7 percent with a payout ratio of 18 percent. This payout ratio isn’t the greatest when compared to other credit card companies on the stock market.
While the payout is less than most other companies, Visa is still paying out a higher dividend than PayPal (which is currently paying zero). However, PayPal is more likely to see growth in the coming years.
Each Company’s Growth
When it comes to growth, PayPal is making strides. Statistics from the company have shown increases in the 20 to 30 percent range for payment volume and the adjusted net income. These increases show a PayPal that is ready to gain a greater share of the e-commerce market as a whole. It has also been gunning for companies like Visa with in-store payment processing. The company has revealed it hopes to boost earnings per share as much as half during 2016.
Each company is still growing, though one plans to grow much more than the other in the coming year. It is too early to say which company would be a better buy than the other. However, it may depend on people’s preferred way to pay. Will people be switching over to e-commerce and mobile payments versus a plastic credit card?