Why Visa Is Trading at a Premium
Visa (V) stock has risen 9.7% over the past six months and 25.7% over the past year.
32 of the 36 analysts covering Visa (V) rated it a “buy” or “strong buy” in March 2017.
Visa (V) took a long-term debt of $16.5 billion for the acquisition of Visa Europe in 2016.
The payment processing industry is witnessing major changes globally due to regulatory changes, increased competition, and a demand for continual innovation.
Visa (V) is witnessing high growth through services and data processing backed by operating business growth.
Visa (V) has managed to expand its operations globally and has seen improving operating margins over the past couple of years.
Visa’s (V) US payment volumes have shown strength over the past few quarters, reflecting relative outperformance when compared with industry peers.
Visa (V) has posted over 40 billion transactions over the past couple of quarters.
Visa is expected to post earnings per share (or EPS) of $0.79 for fiscal 2Q17 and $3.32 for fiscal 2017.
Thirty of the 35 analysts covering Visa (V) rated it a “buy” or “strong buy” in January 2017. Another five analysts, or ~14.0%, rated it a “hold.”
Visa is trading at ~21.3x on a one-year forward earnings basis. Its peers are trading at an average of 16.4x.
Payment processing is witnessing major changes globally with high competition, regulatory changes, and continual innovation.
Visa (V) posted an operating profit margin of 69.0% in fiscal 1Q17, a rise of 2.0% compared to the prior year and 5.0% compared to the previous quarter.
Visa (V) increased its leverage, including current maturities and long-term debt, to $16.4 billion in fiscal 1Q17 against total equity of $31.7 billion in 1Q16.
Visa (V) reported a total of 40.8 billion transactions in fiscal 1Q17, compared to 29.0 billion in fiscal 1Q16. That’s a rise of 41.0% year-over-year.
Visa (V) saw a 17.0% rise in its service revenue to $1.9 billion in fiscal 1Q17. That compares to $1.6 billion in fiscal 1Q16.
Visa’s (V) US payment volumes rose 38.0% in fiscal 1Q17. On a constant dollar basis, growth was 39.0%.
On February 2, 2017, after the market closed, Visa (V) posted its adjusted net earnings of $2.1 billion, or $0.86 per share, for fiscal 1Q17.
MasterCard’s (MA) rebates and incentives have grown at a faster pace over the past few quarters in a bid to garner more partnerships and client spending.
The analyst rating chart below shows that 28 out of the 34 analysts covering MasterCard (MA) have rated it a “buy” or “strong buy” in January 2017.