The global digital payments market is witnessing positive trends as consumers are increasingly preferring digital and contactless payment options over traditional methods of payment.

So, investors could consider buying fundamentally sound consumer financial services stocks, such as American Express Company (AXP), Visa Inc. (V), and Mastercard Incorporated (MA), powering the cashless society.

The digital payment market is growing rapidly, driven by increasing internet penetration and mobile phone usage, the implementation of various government initiatives and policies, changing consumer preferences for convenience and speed, significant growth in e-commerce, and ongoing financial inclusion efforts across the globe.

Moreover, digital payment solutions have revolutionized financial transactions, enhancing efficiency and safety. Various digital payment platforms, including banking cards, UPI, mobile wallets, and online banking, play a key role in the global digital payment industry. These methods enable the transfer of funds and the exchange of value without the need for physical cash.

Therefore, the digital payments market is expected to grow at a CAGR of 20.5% by 2032.

Let’s take a look at the fundamentals of the three best Consumer Financial Services stocks, beginning with the third choice.

Stock #3: American Express Company (AXP)

AXP operates as an integrated payments company operating internationally. It operates through four segments: U.S. Consumer Services; Commercial Services; International Card Services; and Global Merchant and Network Services.

On August 14, 2024, AXP announced plans to open a new Centurion Lounge at Salt Lake City International Airport (SLC). AXP is the first credit card issuer to announce plans to open a proprietary lounge at SLC.

The lounge would give eligible members a place to relax, work, and enjoy a delicious meal before boarding their flight, an outdoor terrace with views of the Wasatch Mountains, a full bar with alcoholic and non-alcoholic beverages, a dedicated wellness room, and other signature Centurion Lounge amenities. 

On June 21, 2024, AXP acquired Tock, a reservation, table, and event management technology provider, from Squarespace (SQSP), the design-driven platform helping entrepreneurs build brands and businesses online.

The company also announced an agreement to acquire Rooam, a technology company that powers mobile payments, ordering, and integrations with point of sale, marketing, and loyalty systems used by restaurants and entertainment venues.

AXP’s trailing-12-month ROCE of 34.51% is 234.1% higher than the industry average of 10.33%. Also, the stock’s trailing-12-month CAPEX/Sales and ROTA of 3.08% and 3.61% are 67.7% and 234.1% higher than the industry averages of 1.84% and 10.33%, respectively.

For the fiscal second quarter that ended June 30, 2024, AXP’s FX adjusted total revenues increased 9% year-over-year to $16.33 billion. The company’s net income came in at $3 billion and $4.15 per share, up 36.4% and 43.6% year-over-year, respectively.

Analysts expect AXP’s revenue for the fiscal third quarter ending September 2024 to increase 8.4% year-over-year to $16.67 billion. For the same period, Street expects its EPS to be $3.28. The company surpassed its EPS estimates in three of the trailing four quarters, which is promising.

AXP’s stock has soared 10.4% over the past three months to close the last trading session at $246.30.

AXP’s POWR Ratings reflect an impressive outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

The stock has a B grade for Sentiment, Stability, and Momentum. It is ranked #14 in the 47-stock Consumer Financial Services industry.

Beyond what is stated above, we’ve also rated AXP for Growth, Quality, and Value. Get all AXP ratings here.

Stock #2: Visa Inc. (V)

V is a payment technology company in the United States and internationally. The company operates VisaNet, a transaction processing network that enables authorization, clearing, and settlement of payment transactions. 

V’s trailing-12-month net income margin of 54.72% is 143.7% higher than the industry average of 22.45%. Its trailing-12-month EBIT margin of 66.95% is 190.3% higher than the 23.06% industry average. Also, the stock’s trailing-12-month EBITDA margin of 69.83% is 213.1% higher than the 22.30% industry average.

During the fiscal third quarter that ended on June 30, 2024, V’s net revenue increased 9.9% year-over-year to $8.90 billion. The company’s operating income grew marginally from the year-ago value to $5.94 billion. Its non-GAAP net income and non-GAAP EPS were $4.91 billion and $2.42, up 9.1% and 12% year-over-year, respectively.

Analysts expect V’s revenue to increase 10.1% year-over-year to $9.47 billion, accompanied by a projected 10.6% year-over-year rise in EPS to $2.58 for the fiscal quarter ending September 2024. Moreover, the company has surpassed consensus EPS estimates in each of the trailing four quarters, which is impressive.

Shares of V have gained 1% over the past month to close the last trading session at $268.20.

V’s POWR Ratings reflect bright prospects. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.

V has a B grade for Quality, Stability, and Momentum. It is ranked #13 in the same industry.

In addition to the POWR Ratings highlighted above, one can access V’s ratings for Growth, Value, and Sentiment here.

Stock #1: Mastercard Incorporated (MA)

MA is a technology company that provides transaction processing and other payment-related products and services in the United States and internationally. 

MA’s trailing-12-month gross profit margin of 100% is 64.5% higher than the industry average of 60.79%. Also, the stock’s trailing-12-month EBIT margin of 9.85% is 8.7% higher than the 9.07% industry average.

During the second quarter that ended June 30, 2024, MA’s net revenue stood at $7 billion, up 11% year-over-year. Its adjusted net income and EPS increased 22% and 24% from the year-ago quarter to $3.30 million and $3.59, respectively.

For the quarter ending September 2024, MA’s EPS is expected to increase 10% year-over-year to $3.73. Its revenue is expected to grow 11.1% year-over-year to $7.26 billion in the same quarter. Moreover, the company has surpassed revenue and EPS estimates in each of the trailing four quarters.

Over the past nine months, the stock has gained 14.4%, closing the last trading session at $468.

MA’s strong fundamentals are reflected in its POWR Ratings. Its overall rating is B, which equates to Buy in our proprietary rating system.

MA has a B grade for Momentum, Stability, and Quality. It is ranked #10 in the same industry.

Click here to access the additional MA ratings (Growth, Value, and Sentiment).

What To Do Next?

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V shares were trading at $267.78 per share on Thursday afternoon, down $0.42 (-0.16%). Year-to-date, V has gained 3.44%, versus a 17.76% rise in the benchmark S&P 500 index during the same period.

About the Author: Nidhi Agarwal

Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities. More...

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