Recent news regarding United States payment volume dropping 3% in April and remaining unchanged in May has weighed on the stock of companies that process such transactions. Those are the numbers out of global powerhouse Visa (NYSE:V). The crux of the weak numbers are new regulations on debit card transactions that led to a 12% decline in April and an 8% fall in May.
Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.

The stock fell on the news, but remains within 5% of the all-time high set earlier this year. Technically, the stock is a leader in the overall market and fundamentally it remains attractive even though it is near the high. The forward P/E ratio is roughly 15.85 and the PEG ratio is 1.00. The dividend yield of 0.7% is not attracting many investors.

Once the debit card issues are flushed through the system and Europe begins to pick up again, it could be a boost to the share price of Visa and other related companies. The silver lining is that even with the negative news the stock is near a high and trades at an attractive valuation.

Competitors
eBay
(Nasdaq:EBAY) is on the list but not because of its auction website that most Americans have bought and sold items at some point in their life. It is on this list because of its PayPal division. PayPal facilitates as a payment processor that is used for transactions that occur online and on mobile devices, and is now expanding into brick and mortar. The payment revenues at eBay grew by 32% in the most recent quarter thanks to customers utilizing the services of PayPal.

The ability to pay at a brick and mortar store with a mobile app on a smart phone could be the future for the payment processing industry. PayPal recently announced it launched an app that will allow 15 million users in the United Kingdom to pay for goods at select retailers. eBay stock is also not far from a 52-week high and trades with a good valuation with a forward P/E ratio of about 14.22 and a PEG ratio of 1.28.

A smaller and not as well-known payment processing company that offers merchant services is Vantiv (NYSE:VNTV). The stock is a recent initial public offering that has done well since it began trading on the New York Stock Exchange. The company is the largest PIN debit acquirer based on the number of transactions in the U.S. The company has a forward P/E ratio of around 16.43 and a PEG ratio of 1.32, which is in line with most of its competitors.

SEE: Investment Valuation Ratios

The Bottom Line
Thinking that PayPal will become a choice for consumers to pay at a clothing store or a local coffee shop may not be far off. Considering I use my iPhone to pay for my daily latte at Starbucks (Nasdaq:SBUX) via an app, why can't PayPal and its competitors offer similar choices that will eventually be the norm for all payment processing? The big question is not will it happen, but rather who will be the leader in the new mobile payment processing. My bet is that both Visa and PayPal will be the big winners.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Matthew McCall did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  2. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  3. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  4. Mutual Funds & ETFs

    ETF Analysis: Vanguard Mid-Cap Value

    Take an in-depth look at the Vanguard Mid-Cap Value ETF, one of the largest and most popular mid-cap funds in the U.S. equity space.
  5. Mutual Funds & ETFs

    ETF Analysis: Schwab US Broad Market

    Take an in-depth look at the Schwab U.S. Broad Market ETF, an incredibly low-cost fund based on a wide selection of the U.S. equity market.
  6. Professionals

    Tips for Helping Clients Though Market Corrections

    When the stock market sees a steep drop, clients are bound to get anxious. Here are some tips for talking them off the ledge.
  7. Stock Analysis

    The Safest Stocks You Can Invest in Right Now

    These stocks are likely to hold up better than others in a bear market, but there's a twist.
  8. Investing Basics

    5 Reasons to Expect Lower Stock Returns

    Lower stock returns are likely here to stay for some time. Here are five reasons why.
  9. Investing Basics

    What to Cut From Your Portfolio Right Now

    Owning stocks may shortly become too scary for your portfolio. Here's why, and here are some alternatives.
  10. Personal Finance

    Careers: Equity Research Vs. Investment Banking

    Equity research is sometimes viewed as the unglamorous, lower-paid cousin to investment banking. In this article, we compare the two careers.
RELATED TERMS
  1. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  2. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  3. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  4. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
  5. BHD (Berhad)

    The suffix Bhd. is an abbreviation of a Malay word "berhad," ...
  6. Impact investing

RELATED FAQS
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  4. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  5. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
  6. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!