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Analyzing Visa’s Valuation after Its Q2 Earnings

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Apr. 25 2019, Published 8:06 a.m. ET

Visa’s valuation

Visa (V) is trading at a forward PE ratio of 27.7x, which is higher than its five-year average PE ratio of 24.5x. The stock has largely been trading at a higher forward PE ratio compared to its historical average for around two years. Visa’s two-year average PE ratio is ~26. Visa’s forward PE ratio is higher than the two-year average. So, the stock looks to be trading at a premium compared to its historical valuation.

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However, Visa’s multiple is lower compared to MasterCard’s (MA) ratio of 30.3x. MasterCard’s five-year average multiple is 25.6x. So, MasterCard has historically traded at a premium compared to Visa. American Express (AXP) and Discover Financial Services (DFS) are trading at forward PE ratios of 13.6x and 8.7x, respectively. Let’s see what analysts recommend for Visa stock.

Analysts’ recommendations

After Visa’s second-quarter earnings release, Susquehanna raised its target price for the stock from $165 to $190. KBW raised its target price for Visa from $179 to $188. On April 23, Jefferies raised its target price for Visa from $175 to $190. Morgan Stanley raised its target price for the stock from $165 to $173.

Among the 39 analysts covering Visa, 14 recommended a “strong buy,” 22 recommended a “buy,” and three recommended a “hold.” The mean target price for Visa is $170, which implies an upside potential of ~5% from its current price.

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