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Visa's Operating Revenues, Expenses, and Much More

PART:
1 2 3 4 5
Part 4
Visa's Operating Revenues, Expenses, and Much More PART 4 OF 5

Understanding Visa’s Premium Valuations

Higher 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.

Understanding Visa’s Premium Valuations

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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.

  • PayPal Holdings (PYPL): 20.28x
  • Total System Services (TSS): 14.52x
  • Global Payments (GPN): 16.30x

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.

  • PayPal Holdings (PYPL): 6.39x
  • Total System Services (TSS): 2.62x
  • Global Payments Inc. (GPN): 3.55x

Let’s now take a look at analysts’ viewpoints on Visa in the next part of this series.

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