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. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  2. Investing

    What Investors Need to Know About Returns in 2016

    Last year wasn’t a great one for investors seeking solid returns, so here are three things we believe all investors need to know about returns in 2016.
  3. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  4. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  5. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  6. Stock Analysis

    Tech Stocks Vs. Financial Stocks in 2016

    Consider the arguments for allocating more of your investment portfolio to either the technology sector or the financial sector for 2016.
  7. Investing News

    Chipotle Served with Criminal Probe

    Chipotle's beat muted expectations and got a clear bill from the CDC, but it now appears that an investigation into its E.coli breakout has expanded.
  8. Stock Analysis

    Analyzing Sprint Corp's Return on Equity (ROE) (S)

    Learn about Sprint's return on equity. Find out why its ROE is negative and how asset turnover and financial leverage impact ROE relative to Sprint's peers.
  9. Stock Analysis

    Why Alphabet is the Best of the 'FANGs' for 2016

    Alphabet just impressed the street, but is it the best FANG stock?
  10. Investing News

    A 2016 Outlook: What January 2009 Can Teach Us

    January 2009 and January 2016 were similar from an investment standpoint, but from a forward-looking perspective, they were very different.
RELATED FAQS
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. 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 >>
COMPANIES IN THIS ARTICLE
Trading Center