I want to take a quick look at Visa (V) before the company reports earnings tomorrow after the close. V is a solid stock, one I used to own (and shouldn’t have sold). Still, I feel Visa is a little high and would like to get back in when the stock’s not overvalued.
One Year Chart
Profit growth has been great the last four quarter, but what concerns me is Estimates show profit growth of +12% and +19% coming the next two quarters. V did whip estimates by 34 cents last quarter, so it could beat again, but 2QtrsAgo V only beat by 4 cents, and 3QtrsAgo merely met estimates.
Also, 2014 profit estimates have only increased 9 cents over the last year, from $8.90 to $8.99, and that’s not a whole lot. So the stock’s not real timely and likely won’t take off and leave us behind.
With teens profit growth expected the next few quarters, V is fairly valued at 23 times earnings. Note the Est. LTG is 17%. Visa is a quality company with high certainty — certainty that you’ll use your debit/credit cards years from now. So V gets a premium P/E in my book (and obviously investors feel the same way.
Fair Value
V was $211 when I did these charts on 5/12. The stock’s $221 today. I think its worth $207.
2015’s Fair Value is $239. So I think it would be good to buy V below say $200. That would give us 20% upside to next year’s Fair Value.
Sharek’s Take
Visa is a core holding for growth investors looking to make a high-teens rate of return over the long-term. The problem now is V is a little-high and the stock’s best bought on a dip. I’m waiting for the stock to correct before I get back in.
View the Earnings Table here. View the Profit History here.View the Ten Year Chart here.
