NEW YORK (TheStreet) -- MasterCard (MA - Get Report) and Visa (V) were both rising slightly in early afternoon trading after the two credit card companies announced the creation of a cross-industry group to fortify payment system security across networks.
The joint venture comes after security breaches at multiple U.S. retailers, most notably Target (TGT) in late 2013 that involved the theft of 40 million credit and debit card records. The new group will incorporate representatives from the retail, financial and equipment manufacturing industries.
The group will initially revolve around 'EMV' chip technology in the U.S., according to the companies' statement. Europe and Asia already use EMV, which stores information on computer chips rather than on the typical magnetic strips on credit and debit cards. EMV stands for Europay, MasterCard and Visa, the companies that initiated the technology.
The two companies set a deadline of Oct. 2015 for U.S. companies to adopt the EMV technology, which is more difficult to counterfeit and which would offer better encryption to protect data. EMV cards could also mandate users to input personal identification numbers for extra security.Banks and retailers, though, have taken their time with the mandatory upgrade thanks to debate over which entity should handle the cost, which experts say could be as much as $10 billion, according to Reuters. Must Read: Warren Buffett's 10 Favorite Dividend Stocks STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
- The revenue growth greatly exceeded the industry average of 20.8%. Since the same quarter one year prior, revenues rose by 12.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- MASTERCARD INC has improved earnings per share by 7.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, MASTERCARD INC increased its bottom line by earning $2.57 versus $2.19 in the prior year. This year, the market expects an improvement in earnings ($3.04 versus $2.57).
- The gross profit margin for MASTERCARD INC is rather high; currently it is at 51.08%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 29.30% is above that of the industry average.
- Net operating cash flow has increased to $1,199.00 million or 38.45% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 21.79%.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 50.93% over the past year, a rise that has exceeded that of the S&P 500 Index. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: MA Ratings Report
"We rate VISA INC (V) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, growth in earnings per share, expanding profit margins and good cash flow from operations. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth greatly exceeded the industry average of 20.8%. Since the same quarter one year prior, revenues rose by 10.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- V has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, V has a quick ratio of 1.54, which demonstrates the ability of the company to cover short-term liquidity needs.
- VISA INC has improved earnings per share by 14.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, VISA INC increased its bottom line by earning $7.58 versus $3.13 in the prior year. This year, the market expects an improvement in earnings ($8.88 versus $7.58).
- The gross profit margin for VISA INC is rather high; currently it is at 69.22%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 44.59% significantly outperformed against the industry average.
- Net operating cash flow has significantly increased by 154.56% to $1,541.00 million when compared to the same quarter last year. In addition, VISA INC has also vastly surpassed the industry average cash flow growth rate of 21.79%.
- You can view the full analysis from the report here: V Ratings Report