Stock (Symbol)

Visa (V)

Stock Price

$89

Sector

Financial

Data is as of

March 9, 2017

Expected to Report

Apr 19- 24

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) is doing extremely well right now with help from Visa Europe, Costco and USAA. Last year Visa acquired Visa Europe, and took Costco’s credit card business from AMEX, and got USAA’s business from MasterCard. USAA is the nation’s 10th largest credit card issuer. These new deals have pushed profit growth beyond expectations. V was expected to have 18% and 13% profit growth the past 2 qtrs and with the help of new business beat the street and grew profits 26% and 25%. International and e-commerce is where the growth opportunity lies for Visa. The global opportunity to digitize cash and check is enormous — Visa CEO in last qtrs earnings call. More than 300,000 online merchants have signed up for Visa Checkout. And overall volume in India jumped 75% last qtr. Visa’s only region with a slow down in growth was Latin America, which is being pulled down by Brazil. This is a very safe stock that’s delivered greater than 20% per year profit growth on average since it went public in 2008. Visa made $2.5 billion in cash last qtr, spent $400 million on dividends and $1.8 billion buying back its own stock. Long-term, analyst project a 16% Est. LTG in addition to a 1% yield — exceptional for a safe stock. Investors pushed Visa stock to a new all-time high right after the company reported, so this a hot stock right now. Visa appeals to both conservative and growth investors, and with results coming in so strong I feel this stock will continue to lead the market higher.

One Year Chart

Visa had negative profit growth earlier in the year due to the acquisition of Visa Europe, and now growth has picked up to the mid-20 per cent range. Estimates call for 16%, 17%, 10% and 10% profit growth the next 4 qtrs, but I feel the company is just keeping expectations low so it can beat them later. Solid Est. LTG of 16% for a safe stock such as this, and the P/E of 27 is reasonable.

Fair Value

Although Visa is considered to be a 17% grower, it usually has a P/E of 25-27 because of the consistency of its business model. Now with profit growth up to the mid-20s, the P/E should rise as well. This qtr I value the stock at 29x earnings, which gets me a Fair Value of $96 this year and $112 next year.

Bottom Line

Visa has been a great company and solid stock ever since it went public. It grows profits at a double-digit rate, pays a dividend and buys back stock in addition to making acquisitions and taking big business from its competitors. Now that profit growth has kicked up a notch, the stock could continue to make new highs. V ranks 12th in the Growth Portfolio and Aggressive Growth Portfolio Power Rankings and 4th in the Conservative Portfolio Power Rankings.