Mastercard (NYSE: MA) and PayPal Holdings (NASDAQ:PYPL) are both large-cap business services companies, but which is the superior investment? We will contrast the two companies based on the strength of their analyst recommendations, profitabiliy, risk, institutional ownership, dividends, valuation and earnings.

Dividends

Mastercard pays an annual dividend of $0.88 per share and has a dividend yield of 0.7%. PayPal Holdings does not pay a dividend. Mastercard pays out 21.8% of its earnings in the form of a dividend. Mastercard has raised its dividend for 5 consecutive years.

Earnings & Valuation

This table compares Mastercard and PayPal Holdings’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Mastercard $11.42 billion 12.11 $6.61 billion $4.04 32.13
PayPal Holdings $11.76 billion 6.02 $2.26 billion $1.25 47.09

Mastercard has higher revenue, but lower earnings than PayPal Holdings. Mastercard is trading at a lower price-to-earnings ratio than PayPal Holdings, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Mastercard has a beta of 1.17, indicating that its share price is 17% more volatile than the S&P 500. Comparatively, PayPal Holdings has a beta of 0.99, indicating that its share price is 1% less volatile than the S&P 500.

Profitability

This table compares Mastercard and PayPal Holdings’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Mastercard 38.30% 74.92% 23.61%
PayPal Holdings 12.82% 11.10% 4.87%

Analyst Recommendations

This is a breakdown of current ratings and price targets for Mastercard and PayPal Holdings, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Mastercard 0 4 19 1 2.88
PayPal Holdings 0 9 29 1 2.79

Mastercard presently has a consensus target price of $128.45, suggesting a potential downside of 1.06%. PayPal Holdings has a consensus target price of $60.21, suggesting a potential upside of 2.29%. Given PayPal Holdings’ higher probable upside, analysts clearly believe PayPal Holdings is more favorable than Mastercard.

Institutional & Insider Ownership

75.8% of Mastercard shares are held by institutional investors. Comparatively, 81.3% of PayPal Holdings shares are held by institutional investors. 0.3% of Mastercard shares are held by insiders. Comparatively, 6.0% of PayPal Holdings shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Summary

Mastercard beats PayPal Holdings on 10 of the 17 factors compared between the two stocks.

About Mastercard

MasterCard Incorporated is a technology company that connects consumers, financial institutions, merchants, governments and businesses across the world, enabling them to use electronic forms of payment. The Company operates through Payment Solutions segment. The Company allows user to make payments by creating a range of payment solutions and services using its brands, which include MasterCard, Maestro and Cirrus. The Company provides a range of products and solutions that support payment products, which customers can offer to their cardholders. The Company’s services facilitate transactions on its network among cardholders, merchants, financial institutions and governments. The Company’s products include consumer credit and charge, commercial, debit, prepaid, commercial and digital. The Company’s consumer credit and charge offers a range of programs that enables issuers to provide consumers with cards allowing users to defer payment.

About PayPal Holdings

PayPal Holdings, Inc. is a technology platform and digital payments company that enables digital and mobile payments on behalf of consumers and merchants. The Company’s combined payment solutions, including its PayPal, PayPal Credit, Braintree, Venmo, Xoom and Paydiant products, compose its Payments Platform. It operates a two-sided global technology platform that links its customers, both merchants and consumers, around the globe to facilitate the processing of payment transactions, allowing it to connect merchants and consumers. It allows its customers to use their account for both purchase and paying for goods, as well as to transfer and withdraw funds. It enables consumers to exchange funds with merchants using funding sources, which include bank account, PayPal account balance, PayPal Credit account, credit and debit card or other stored value products. It offers consumers person-to-person payment solutions through its PayPal Website and mobile application, Venmo and Xoom.

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