One Is Built for a Recession. Here’s Which One to Own.

It’s hard to find a truly recession-proof stock, but some companies are better equipped to weather recessions than others. When it comes to digital payments, Visa (NYSE: V) and Mastercard (NYSE: MA) run a virtual duopoly, but one is much better positioned to endure a recession than the other.

If you had to choose between the two, my go-to would be Visa because its balance sheet is more rock-solid than Mastercard’s.

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Part of thriving through a recession is having resources that keep you from having to take on debt to keep operations running as usual, and Visa has more of them. To begin, Visa has over $14.7 billion in cash and cash equivalents compared to Mastercard’s $10.9 billion. You can think of this as each company’s emergency fund that acts as a safety net.

Secondly, Visa has a much lower debt burden than Mastercard. Its debt-to-equity ratio — which shows how much debt a company is using to finance its assets — is around 55% compared to Mastercard’s roughly 245%. This difference matters during a recession because it means spending much less on interest payments and keeping more money for business purposes.

Both companies may experience a slight slowdown as consumers reduce spending, but Visa is better built to weather the storm without missing a beat.

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Stefon Walters has positions in Visa. The Motley Fool has positions in and recommends Mastercard and Visa. The Motley Fool has a disclosure policy.

Visa vs. Mastercard: One Is Built for a Recession. Here’s Which One to Own. was originally published by The Motley Fool

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