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What’s behind Visa’s Premium Valuations?


Feb. 13 2018, Updated 9:03 a.m. ET

Premium valuations

Visa’s (V) PE (price-to-earnings multiple) stood at 24.50x on a next-12-month basis compared to the peer average of 20.65x, implying a premium valuation for the stock.

The company’s competitors (XLF) Fiserv (FISV), Green Dot (GDOT), and Total System Services (TSS) have PEs of 21.26x, 21.06x, and 19.63x, respectively, on a next-12-month basis.

Visa has a premium valuation for multiple reasons. As the trend of digitization is expected to continue, the company could experience further increases in its valuations. Its fiscal 1Q18 results were positively affected by the holiday season in the United States.

According to Visa’s management, the 2017 holiday season saw upward momentum in Visa’s debit and credit volumes on the back of strong performances in the entertainment and retail industries. Moreover, rising gas prices were also a major contributor.

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Outlook on India

Visa continues to maintain its focus on the Indian economy. The company is still working with its Indian clients, regulators, and with the Indian government, which could further improve the company’s market share in the country. Moreover, Visa is in the process of making investments into India in order to fuel growth in electronic payments.

Visa has also maintained its focus on rewarding its shareholders. In fiscal 1Q18, the company rewarded shareholders with share repurchases of $1.7 billion. It distributed dividends of ~$460 million during the same period.


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