It has never been easier to spend money. These days, consumers can wave their phone at the card reader and get pleasant haptic feedback while money simply disappears from their accounts. Through technologies like these, financial service companies have made business facilitation easier than ever before. This trend has also led to some of the best financial services stocks to buy for steady growth as payments and money transfers modernize around the world.
To determine the best financial services stocks, investors should keep an eye on key metrics like the price-to-earnings ratio and their proportions of assets to liabilities. Keeping an eye on which technologies they offer and the rate of their adoption can also clue investors in on which stocks to buy in the sector. Moreover, the relative stability of financial services stocks can provide long-term returns due to the overall high profitability of the sector itself. Here are three such stocks that exhibit genuine growth potential and stability for the future.
Mastercard (MA)
Currently commanding a Strong Buy rating from analysts, Mastercard (NYSE:MA) is one of the best financial services stocks to hold for the long term. The company has successfully navigated the last two stock market crashes and shown healthy growth year-over-year. Furthermore, the company’s revenue and expenses are always kept in line and stable, with a steady profit margin hovering around 46% for Q1 2024.
While Mastercard may not be exceptionally innovative as far as financial services companies go, its astute business management and structure have kept its products, like credit and debit cards, relevant over the last 20 years or so.
Its analyst aggregate 12-month price target has hovered around $525.25 for the last three months. That represents roughly an 18% increase from the current price of around $443. Bearing these metrics and trends in mind, MA stock will likely continue to deliver steady returns for investors, regardless of broader market conditions.
Visa (V)
As the dollar’s purchasing power weakens and wages stagnate, consumers rely on the products of companies like Visa (NYSE:V) daily. Yet another one of the best financial services stocks to buy thanks to its Strong Buy rating, Visa’s hyper-specialization in credit cards has been its cash cow over the years.
And it keeps paying too. It consistently maintains a profit margin above 50%, signaling healthy income management while growing as the world’s largest credit card provider. Moreover, credit cards have unfortunately become a central part of the average American’s financial strategy. These days, everything goes on credit cards for most people, meaning Visa and its brand partners ultimately rake in a portion of the interest collected on unpaid balances.
Thanks to this business model, Visa will likely keep up its steady growth and could even raise its dividend depending on consumer spending trends.
Block (SQ)
One of the most innovative financial services companies on the market, Block (NYSE:SQ) has several catalysts in its future. Between its Square payment kiosks, Afterpay layaway service and Cash App, the company has several platforms to grow revenue as more and more people adopt electronic payment types instead of cold hard cash.
Starting with its service, Square, the company has strategically worked with its customers to raise capital through the tipping culture. Because people are very psychologically prone to suggestions for tips, the kiosks automatically suggest percentages — usually between 15% and 25%. While one would normally tip what they think is appropriate, now they’re faced with choosing a percentage. That results in higher tips, of which Block takes a percentage.
Then services like Afterpay bolster Block’s revenues by enticing consumers to buy something on installment payments they wouldn’t normally be able to afford. These psychological plays will likely keep the company relevant for the years to come, so long as it doesn’t earn a negative reputation for these services.
On the date of publication, Viktor Zarev did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
