Analyzing Mastercard (NYSE:MA) & MAXIMUS (NYSE:MMS)

Mastercard (NYSE:MA) and MAXIMUS (NYSE:MMS) are both business services companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitability, earnings, analyst recommendations, dividends, institutional ownership, valuation and risk.

Dividends

Mastercard pays an annual dividend of $1.60 per share and has a dividend yield of 0.5%. MAXIMUS pays an annual dividend of $1.12 per share and has a dividend yield of 1.6%. Mastercard pays out 20.6% of its earnings in the form of a dividend. MAXIMUS pays out 30.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Mastercard has increased its dividend for 1 consecutive years and MAXIMUS has increased its dividend for 2 consecutive years. MAXIMUS is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Mastercard and MAXIMUS’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Mastercard 45.12% 129.52% 25.04%
MAXIMUS 6.41% 17.29% 10.88%

Earnings and Valuation

This table compares Mastercard and MAXIMUS’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Mastercard $16.88 billion 20.27 $8.12 billion $7.77 44.00
MAXIMUS $2.89 billion 1.52 $240.82 million $3.72 19.23

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

Institutional and Insider Ownership

73.7% of Mastercard shares are owned by institutional investors. Comparatively, 94.2% of MAXIMUS shares are owned by institutional investors. 3.8% of Mastercard shares are owned by company insiders. Comparatively, 2.0% of MAXIMUS shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Volatility & Risk

Mastercard has a beta of 1.11, meaning that its stock price is 11% more volatile than the S&P 500. Comparatively, MAXIMUS has a beta of 0.89, meaning that its stock price is 11% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings for Mastercard and MAXIMUS, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Mastercard 0 5 27 0 2.84
MAXIMUS 0 1 1 1 3.00

Mastercard presently has a consensus target price of $346.25, indicating a potential upside of 1.29%. MAXIMUS has a consensus target price of $85.00, indicating a potential upside of 18.80%. Given MAXIMUS’s stronger consensus rating and higher probable upside, analysts plainly believe MAXIMUS is more favorable than Mastercard.

Summary

Mastercard beats MAXIMUS on 12 of the 18 factors compared between the two stocks.

About Mastercard

Mastercard Incorporated, a technology company, provides transaction processing and other payment-related products and services in the United States and internationally. It facilitates the processing of payment transactions, including authorization, clearing, and settlement, as well as delivers related products and services. The company offers integrated products and services for account holders, merchants, financial institutions, businesses, governments, and other organizations, such as programs that enable issuers to provide consumers with credits to defer payments; payment products and solutions that allow its customers to access funds in deposit and other accounts; prepaid payment programs and management services; and commercial payment products and solutions. It also provides value-added products and services comprising safety and security products, loyalty and reward programs, information and analytics services, consulting services, and issuer and acquirer processing services. The company offers payment solutions and services under the MasterCard, Maestro, and Cirrus brands. Mastercard Incorporated has a strategic alliance with Finexio; and a strategic partnership with Network International to develop electronic payments in Africa and the Middle East. The company was founded in 1966 and is headquartered in Purchase, New York.

About MAXIMUS

MAXIMUS, Inc. provides business process services (BPS) to government health and human services programs worldwide. The company's Health Services segment offers various BPS, appeals, and assessments for state, provincial, and national government programs, including Medicaid, Children's Health Insurance Program, Affordable Care Act, Health Insurance British Columbia, Health Assessment Advisory Service contract, and Preadmission Screening and Resident Reviews. This segment offers program eligibility support and enrollment; application assistance and independent health plan enrollment counseling; beneficiary outreach, education, eligibility, enrollment, and renewal; document and record management; payment processing and administration; and digital eHealth and wellbeing solutions. It also provides independent disability, long-term sick, and other health assessment; occupational health clinical assessment; specialized consulting; and centralized multilingual customer contact centers and multichannel self-service options for enrollment. The company's U.S. Federal Services segment offers centralized citizen engagement centers and support services; document and record management; case management, citizen engagement, and consumer education; independent medical reviews and worker's compensation benefit appeals; and Medicare and Medicaid appeals, and program eligibility appeals. It also provides modernization of systems and information technology infrastructure; infrastructure operations and support services; software development, operations, and management services; and data analytics services. The company's Human Services segment offers national, state, provincial, and local human services agencies, as well as various BPS and related consulting services. It also provides management tools and professional consulting, program consulting, and tax credit and employer services. The company was founded in 1975 and is headquartered in Reston, Virginia.

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