Stock (Symbol)

Visa (V)

Stock Price

$77

Sector

Financial

Data is as of

May 19, 2016

Expected to Report

Jul 21 – Jul 25

Company Description

Visa Inc. is a payments technology company. The Company is engaged in operating a processing network, VisaNet, which facilitates authorization, clearing and settlement of payment transactions across the world. The Company provides its services to consumers, businesses, financial institutions and governments in more than 200 countries and territories for electronic payments. The Company offers fraud protection for account holders and rapid payment for merchants. The Company provides a variety of payment solutions that support payment products that issuers can offer to their account holders, such as pay now with debit, pay ahead with prepaid or pay later with credit products. The Company offers a suite of digital, eCommerce and mobile products and services. Source: Thomson Financial

Sharek’s Take

Visa (V) was a better deal years ago when profits were growing around 25% a year and the P/E was around 20. Nowadays the stock has a P/E in the high 20s as profits are expected to climb just 6% this year. This year the management indicated the strong U.S. dollar, reduced volume due to the strong dollar, a volatile China and low oil prices as reasons for slower growth. But hope may be on the horizon as F/X issues should dampen, Visa Europe could boost profits, and the new Costco Visa cards will be mailed out during the next month. Although profit growth was just 8% last qtr, qtrly estimates call for -9%, 16%, 12% and 18% growth the next 4 qtrs. So V might soon be back to growing in the teens again like it did during 2014 & 2015. V is a solid buy-and-hold stock that successful fund managers count on as a core holding. Management buys back stock in addition to paying a dividend, and the estimated long-term growth rate is a robust 17%. This stock is suitable for conservative and growth oriented investors, but investors might want to wait for a better price to buy in at as the valuation is a bit high right now.

One Year Chart

Visa’s Annual Profit Estimates have declined for 3 straight qtrs, from $3.00 to $2.77 and I’m surprised the stock is so close to its highs considering. Last qtr the company beat the street by a penny, but that figure dropped by 7 cents the six months prior. The -9% profit growth estimate next qtr looks to be a one-time deal and investors are looking ahead to the following qtrs where 16%, 12% and 18% profit growth is expected. P/E was 26 last qtr and I felt that was high. Now its 28.

Fair Value

I’m surprised this stock is getting such a premium valuation, but that’s smart money managers knowing they can depend on V propping the stock up. My Fair Value is 25x earnings, or $69 a share. The stock is barely 10% over that, so maybe investors will get a buying opportunity if we get a stock market correction this Summer.

Bottom Line

Visa is a safe stock with an estimated long-term growth rate of 17% a year in addition to a 1% yield — and that makes it attractive to smart money managers. But right now profit growth is not great and the valuation is a tad too high, thus if you’re the type of investor who’s looking for 15% returns you should wait to get the stock on a dip. V ranks 32nd of 37 stocks in the Growth Portfolio Power Rankings and 29th of 34 stocks in the Conservative Portfolio Power Rankings.