Understanding Visa’s Premium Valuations
Wall Street analysts have given a one-year price target of $110.00 per share for Visa stock (V). The target represents an increase of 4.46% from the current stock price. The company has garnered service revenues of $4.97 billion from fiscal 1Q16 to fiscal 3Q16 and $5.85 billion from fiscal 1Q17 to fiscal 3Q17, which reflects an increase of 18%. This substantial increase in the company’s service revenues came on the back of a rise in nominal payments volume.
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Visa has a one-year-forward price to cash flow ratio of 21.63x, compared to its competitors’ average one-year forward price to cash flow ratio of 17.03x, which reflects Visa’s premium valuations. One-year forward price to cash flow ratios for Visa’s competitors are as follows.
Visa has incurred general and administrative expenses of $566 million from fiscal 1Q16 to fiscal 3Q16 and $822 million from fiscal 1Q17 to fiscal 3Q17, reflecting a substantial rise of 45%.
Price to sales ratio
Visa (V) has a price to sales ratio of 13.56x on a trailing-12-month or TTM basis. Other consumer financial players (XLF) have the following price to sales ratios on a TTM basis.
Let’s now take a look at analysts’ viewpoints on Visa in the next part of this series.