MasterCard (MA) reported first quarter 2017 revenue of $2.734 billion on May 2nd, before the start of trading. The company reported net income of $1.081 billion and adjusted diluted EPS of $1.01. Revenue grew by 12 percent from a year ago, while net income increased by 14 percent, and adjusted diluted EPS rose 17 percent. Analysts had been looking for revenue of $2.654 billion and EPS of $0.95; MA easily beat those estimates.

The company reported worldwide gross dollar volume (GDV) of $1.181 trillion in the first quarter of 2017, up from $1.143 trillion in the first quarter of 2016. Worldwide purchase volume increased to $862 billion in the quarter from $836 billion a year ago. The number of worldwide purchase transactions rose to 17.124 billion from 15.834 billion prior.

MA Chart

MA data by YCharts

The results seen by MA are robust and show continued strong growth, shares, as a result, are trading higher in early in the day, to nearly $117.50. The MA results reflect those seen of Visa (V) on April 20th. (See also, Visa Crushes Consensus in Q2, MasterCard Next Up.)

In the chart below, you can see that the market is willing to assign the same multiples to both companies.

MA PE Ratio (Forward) Chart

MA PE Ratio (Forward) data by YCharts

On a price-to-sales multiple, investors seemingly are willing to pay more for Visa than Mastercard.

MA PS Ratio (Forward 1y) Chart

MA PS Ratio (Forward 1y) data by YCharts

When you adjust all of the numbers for growth, Visa is trading at the cheaper of the two PEG ratios.

MA PEG Ratio (Forward) Chart

MA PEG Ratio (Forward) data by YCharts

Make no mistake about it, these companies are both winners in the space, and the move to the cashless society is likely only going to accelerate in the future.

MA EPS Estimates for 2 Fiscal Years Ahead Chart

MA EPS Estimates for 2 Fiscal Years Ahead data by YCharts

The correlation between the two companies revenue is very high.

MA Revenue (TTM) Chart

MA Revenue (TTM) data by YCharts

Recently, a survey conducted by Ipsos/ING found that 34 percent of respondents in Europe and 38 percent of respondents in the United States would be willing to go completely cash free. Meanwhile, only 21 percent in Europe and 34 percent in the United States hardly use cash now. (See also, Credit Cards and the Cashless Society.)

Growth in MasterCard and Visa is strong, and recent results show the trends are fairly clear, with increasing volumes and transactions for both companies. As time goes by these number should only be heading in one direction, higher, as the age of mobility and the cashless society continue to gain transaction.

Michael Kramer and the clients of Mott Capital Management, LLC own shares of V and MA. Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request the advisor will provide a list of all recommendation made during the past twelve months. Past performance is not indicative of future performance.

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