Visa and Mastercard are the two behemoths of the payments sector. Two players operating in a virtual duopoly, in a fully consolidated, hyper-regulated market with insurmountable barriers to entry. This position has enabled them to post impressive profitability figures, as confirmed by their latest results.

These are also two companies whose results always carry a more global lesson, as they tell us about the evolution of consumption, the main driver of developed economies.

Perfect copy

Visa and Mastercard posted excellent results in Q4 2024, hailed by investors as both stocks marked new highs following these publications, in the wake of an exceptional stock market run over the last 10 years.

These figures round off a remarkable 2024. Over the year as a whole, sales rose by 10% for Visa and 12% for Mastercard, while net income increased by 14% and 15% respectively. The more attentive among you will have noticed that margins have improved a little in the process.

The same trends carried both companies. Firstly, payment volume growth was solid, reflecting good underlying consumer momentum. The 4th quarter, which includes the holiday season, was particularly buoyant. Cross-border transactions also rose sharply.

Macro lesson

Visa and Mastercard are also two key companies in the functioning of our economies. A figure to illustrate this: in 2024, the volume of payments processed by Visa amounted to 13,200 billion dollars. So their results also tell us something about the dynamics of consumption around the world.

And Visa and Mastercard's main market, the USA (41% and 33% of sales respectively), is doing well. Consumer spending is still going strong, as confirmed by GDP figures for the 4th quarter of 2024. The consumption component (+4.2%) grew much faster than expected.

Exceptional profitability

What sets these two stocks apart is their exceptional profitability. The net margin is 46% for Mastercard and 56% for Visa (the size effect explains this difference in favor of Visa). By way of comparison, Alphabet, Apple, Meta and Microsoft are between 27 and 35% on this metric.

What's more, the capital intensity of these companies is very low, and so their ability to return cash to their shareholders is quite extraordinary, with a free-cash-flow margin of over 50%. For example, Visa returned over $21 billion to its shareholders (17 in dividends and 4 in share buy-backs) in 2024. And Mastercard distributed 11 billion dollars (9 in dividends and 2 in share buy-backs). Mastercard is the S&P 500 company with the highest return on capital, with an ROE of 192%.

All this explains the high valuation of both shares. With a PER 2025 of 30.9 for Visa and 35.4 for Mastercard, the premium is significant compared to the overall market (the forward PE of the S&P500 is around 22). Nevertheless, both stocks are slightly below their historical valuation ratios.

 

Although the fundamentals are exceptional, MarketScreener's analysts believe that the valuation is high given the growth prospects for the coming years. Indeed, sales are only expected to grow by around 10% a year. We therefore believe that the payment sector has already paid well.