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How Visa’s Valuation Compares

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Price-to-book ratios

While Visa’s (V) NTM (next-12-month) price-to-book ratio is 7.4x, competitors’ average is 8.0x. Peers Mastercard (MA), Discover Financial Services (DFS), and Ally Financial (ALLY) have NTM price-to-book ratios of 21.0x, 2.3x, and 0.81x, respectively.

Visa’s valuation might rise with US economic improvement, which would fuel spending and boost Visa’s revenue. Government support and increased payment digitalization may also boost its valuation.

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What could help Visa?

Visa is optimistic about US markets, where it sees substantial growth opportunities. As we’ve discussed, the company’s performance is sensitive to consumer spending patterns. In the third fiscal quarter, the company could be supported by higher oil prices (which fuel the company’s revenue), lower unemployment, and economic improvement.

Favorable momentum in the contactless payment and B2B (business-to-business) space, where Visa has acquired Fraedom, could also draw market participants to Visa. Whereas Visa has an LTM (last-12-month) price-to-book ratio of 8.5x, peers (XLF) Mastercard, Discover, and Ally Financial have LTM ratios of 35.0x, 2.5x, and 0.89x, respectively.

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