NEW YORK (TheStreet) -- With MasterCard (MA - Get Report) and Visa  (V - Get Report) reporting earnings today and tomorrow, respectively, we decided to check Quant Ratings to see what payments companies are good investments.

The credit card industry, which is just one part of the large payments processing business, is slated to benefit from China's opening up of its payments system to foreign credit card companies, starting June 2015. China's debit and credit card transactions totaled $6.8 trillion in 2014. Visa, MasterCard, American Express (AXP - Get Report) and Discover  (DFS - Get Report) are bound to get a share of that business.

The other side of the business is data processing and outsourced services. This industry's performance is tied to that of the financial services sector. The outsourced services business is dominated by Fiserv (FISV), Fidelity National (FIS - Get Report) and Jack Henry (JKHY - Get Report). The more specialized credit services component is led by privately held companies and Total System Services (TSS - Get Report). Fidelity National and Jack Henry provide services to banks, while Total System provides the component that deals with electronic payment processing of credit and debit card transactions.

So what are the best companies in the data processing & outsourced services sub-industry investors should buy? Here are the top three, according to TheStreet Ratings, TheStreet's proprietary ratings tool.

TheStreet Ratings projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points,TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

Check out which three large-cap tech companies made the list. And when you're done be sure to read about which large-cap pharmaceutical companies to buy now. Year-to-date returns are based on April 28, 2015 closing prices. The highest-rated stock appears last -- read more to see which one is No. 1.

JKHY ChartJKHY data by YCharts
3. Jack Henry & Associates, Inc. (JKHY - Get Report)

Rating: Buy, A+
Market Cap: $5.6 billion
Year-to-date return: 9.3%

Jack Henry & Associates, Inc. provides technology solutions and payment processing services primarily for financial services organizations in the United States.

"We rate HENRY (JACK) & ASSOCIATES (JKHY) 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, increase in net income and solid stock price performance. 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 came in higher than the industry average of 20.8%. Since the same quarter one year prior, revenues slightly increased by 6.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • JKHY's debt-to-equity ratio is very low at 0.08 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
  • HENRY (JACK) & ASSOCIATES has improved earnings per share by 12.5% 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, HENRY (JACK) & ASSOCIATES increased its bottom line by earning $2.36 versus $2.04 in the prior year. This year, the market expects an improvement in earnings ($2.65 versus $2.36).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the IT Services industry average. The net income increased by 7.5% when compared to the same quarter one year prior, going from $54.90 million to $59.00 million.
  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Looking ahead, the stock's 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 the other strengths this company displays justify these higher price levels.
Must Read:  Is Apple Too Expensive to Buy Right Now?


TSS ChartTSS data by YCharts
2. Total System Services, Inc. (TSS - Get Report)
Rating: Buy, A+
Market Cap: $7.1 billion
Year-to-date return: 13%

Total System Services, Inc. provides electronic payment processing services to banks and other financial institutions in the United States, Europe, Canada, Mexico, and internationally.

"We rate TOTAL SYSTEM SERVICES INC (TSS) 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, compelling growth in net income 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 came in higher than the industry average of 20.8%. Since the same quarter one year prior, revenues slightly increased by 8.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.86, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, TSS has a quick ratio of 1.93, which demonstrates the ability of the company to cover short-term liquidity needs.
  • TOTAL SYSTEM SERVICES INC has improved earnings per share by 29.4% 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, TOTAL SYSTEM SERVICES INC increased its bottom line by earning $1.46 versus $1.27 in the prior year. This year, the market expects an improvement in earnings ($2.20 versus $1.46).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the IT Services industry. The net income increased by 21.6% when compared to the same quarter one year prior, going from $65.66 million to $79.86 million.
  • Net operating cash flow has increased to $170.09 million or 17.37% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -6.86%.
Must Read:  3 Big Cable Companies to Add to Your Portfolio, Including Time Warner and Comcast


FIS ChartFIS data by YCharts
1. Fidelity National Information Services, Inc. (FIS - Get Report)
Rating: Buy, A+
Market Cap: $18.2 billion
Year-to-date return: 3.3%

Fidelity National Information Services, Inc. provides banking and payments technology, consulting, and outsourcing solutions worldwide.

"We rate FIDELITY NATIONAL INFO SVCS (FIS) 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, impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 20.8%. Since the same quarter one year prior, revenues slightly increased by 7.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.77, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.15, which illustrates the ability to avoid short-term cash problems.
  • FIDELITY NATIONAL INFO SVCS reported significant earnings per share improvement 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, FIDELITY NATIONAL INFO SVCS increased its bottom line by earning $2.39 versus $1.66 in the prior year. This year, the market expects an improvement in earnings ($3.30 versus $2.39).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the IT Services industry. The net income increased by 171.6% when compared to the same quarter one year prior, rising from $71.90 million to $195.30 million.
  • Net operating cash flow has increased to $477.80 million or 24.29% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -6.86%.
Must Read:  3 Mid-Cap Pharmaceutical Companies to Add to Your Portfolio