Shares of Visa (V) haven’t moved all year. The stock started 2014 at $222 and is $214 right now. But before you get excited about this being your time to get into V, think again. Visa’s profit growth slowed last quarter, and it looks like that slow-growth will continue. What was once a 25% grower is now a 15% grower, and that is more than enough to put a stock in neutral for a while. In fact, I think V will be around this price a year from now.
One Year Chart
Very big warning signes in the one year chart, even though the chart isn’t that bad. But notice along the bottom how profit growth used to be in the 20% to 30% range. Until last quarter when profit growth clocked in at 15%. Also on the bottom/right Estimates show growth might continue the 15% area the next couple of quarters. And these estimates just got reduced a bit.
In past years V would beat the street and up guidance during the year. But V only beat by 7 cents last quarter, a slowdown from the 34 cent beat 2QtrsAgo. When I look at Annual Estimates, 2014 & 2015 estimates are around what they were four quarters ago. So the great Visa results may be a thing of the past. Now we have to live with good results.
Fair Value
Visa is worth 23 times earnings when profits are growing around 20%. Now we have to take our Fair Value P/E down to 19 due to the slowdown. That gives us a $171 2014 Fair Value on a stock trading for $214. Even a year from now the stock has a Fair Value of $197. BTW Visa hit a low of $195 last week before rebounding.
Sharek’s Take
Visa is a great company and a good stock if you own it at lower levels and want to hold for the long-term. But the stock has to base a while and digest the gains of years past when it garnered a higher P/E. I see a back-and-forth year for Visa in 2015. I’m not a buyer here.
View the Earnings Table here. View the Profit History here.View the Ten Year Chart here.
