Stock (Symbol)

Visa (V)

Stock Price

$80

Sector

Financial

Data is as of

August 22, 2016

Expected to Report

Oct 31 – Nov 4

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) might be getting its grove back. Profitwise I mean. The stock has been OK the past year, and is a dollar away from its All-Time high. On the other hand, profit growth has slowed the past 4 qtrs, from 13% to 10%, 8% and most recently -7%. But that looks to change as profit growth looks to average 18% the next 4 qtrs. Will that be enough to make the stock break out and run higher? I dunno. Right now V sells for 29x 2016 profit estimates. The good news is the company ends its fiscal year on September 30th, thus I’m already looking ahead to 2017 figures. My 2017 Fair Value is $90, which would be a P/E of 27 on $3.32 in profits. Part of the reason profits are set to accelerate is Visa was suffering from reduced volume due to the strong USD, and now the dollar has stabilized. A volatile China and low oil prices were also reasons for slower growth, and those issues have subsided too. Recently acquired Visa Europe and the new Costco Visa cards could be positive catalysts in the coming year. This stock is a core holding for both growth investors and conservative ones. Management buys back stock in addition to paying a 1% dividend and the stock has a nice Estimated Long Term Growth Rate of 16% a year.

One Year Chart

Visa had -7% profit growth on 3% sales growth last qtr, as profits were negatively affected by the acquisition of Visa Europe. Visa’s Annual Profit Estimates had declined for 3 straight qtrs, but rose slightly this qtr. For a conservative stock the Est LTG of 16% is good, and a 1% yield means a hypothetical 17% estimated total annual return. Profit growth is expected to be 18%, 13%, 21% and 20% the next 4 qtrs. Some of that good growth can be attributed to slow growth the past few qtrs, which make comparisons easy. P/E of 24 is pretty good, this stock just had a P/E of 28.

Fair Value

Not to be a Debbie Downer but this stock could be cheaper. Maybe it’s because I am used to Visa having a P/E of around 20. And when it had the P/E of 20 it was growing profits faster than 20% a year. So you’re not getting a value here. Now that I’ve said that watch the stock run higher lol. With $3.32 in expected profits next year and +20% profit growth expected during mid-2017 perhaps the stock could get to 27x earnings? That equates to $90 which would be 13% higher.

Bottom Line

Visa has a lot of good things lining up such as sales from the Costco Visa and Visa Europe, a better USD situation, and gasoline prices which aren’t dropping. The BIG thing is profit growth is expected to accelerate to 20% again (albeit vs. easy comparisons from a year-ago). This is a safe stock with good Est LTG a dividend and a stock buyback program. That’s a recipe for success. V ranks 14th in the Growth Portfolio Power Rankings and 5th in the Conservative Portfolio Power Rankings. I will add it to the Aggressive Growth Portfolio where it will rank 14th in the Power Rankings.