Visa Inc. (V - Free Visa Stock Report), is the world’s largest retail electronics payments network, providing processing services and payment product platforms across the globe. The stock has been on quite a run since joining the Dow Jones Industrial Average in September of 2013. The company’s network includes credit, debit, prepaid, and commercial payments offered under a number of its brand names. For a more in-depth rundown of brands, as well as proxy information and detailed company-specific tidbits check out our Business Blurb in the middle of the Value Line report.
One clear sign that things have been going well for Visa was management’s recently announced a plan to split the stock. The board of directors has declared a split (four shares for each unit owned) effective March 19th. The subsequent reduction in the quotation makes these shares more accessible to the public, and thus, more appealing. In this case, Visa’s share price was recently up to about $275 so the post-split price will likely be somewhere in the $68-$69 range, barring an unforeseen fluctuation in the coming days. Our analyst for the company, Sharif Abdou, has gotten out ahead of these changes and already adjusted his page, dated February 13, 2015, for the stock split. A quick glance at the Top Label, located at the very top of the page, makes the subscriber quickly aware of the current price, as well as its price-to-earnings ratio and relative price-to-earnings ratio. It’s becoming commonplace for Visa’s leadership to reward their shareholders. Along with the split, a new $5 billion stock-repurchase program was disclosed, and a 20% hike in the quarterly dividend was announced. The quarterly rate is now $0.12 per interim, and $0.48 on an annualized basis. This information is broken out in the Quarterly Dividends Paid box on the bottom left-hand side of the Value Line report.
Looking at the most recently completed quarterly performance, Visa’s run-up in price was well deserved. Mr. Abdou breaks it down in great detail in the Commentary section of our report. For the December interim, which is Visa’s first fiscal quarter (year ends September 30th), revenues advanced more than 7% from the like 2013 figure. Moreover, each operating segment reported healthy year-over-year top-line inclines. Too, Visa has done the enviable task of expanding revenues while keeping its cost structure in check; as of December 31st, the operating margin was at an all-time high of 69.7%.That has the company on track to post record earnings of $2.60 a share in fiscal 2015.
Prior to 2008, Visa was known, for the most part, as one of the dominant credit card players on the domestic front. Fast forward to present day, while MasterCard Incorporated (MA) is right up there with it, and American Express (AXP - Free American Express Stock Report) has the customer base with the loftier credit scores, Visa appears to be best-in-class. Indeed, not only is V now included in the Dow, but it is generating all the positive headlines, while AXP works through the end of its exclusivity agreements with major customers like Costco Wholesale (COST) and JetBlue Airways (JBLU). Another bonus that the investment community seems to be enthused about is the international expansion figures that the company has been putting up of late. Visa’s overseas presence is taking off; volumes in the Asia/Pacific, Latin America, and EMEA (encompassing Europe, the Middle East, and Africa), rose 7.9%, 13.7%, and 16.8%, respectively, in the latest reporting period versus the year-earlier figures. In fact, transactions generated abroad currently sum to 59% of the total, so thinking of this company from only a domestic perspective is extremely short-sighted. Accordingly, Visa continues to push into more foreign markets and with a longstanding track record for success in doing just that, we are inclined to think even brighter days are ahead.
On top of this, the aforementioned divorce between AMEX and Costco ended with Visa landing that large credit card portfolio. On the day this news was announced, V shares hit an all-time high north of $278 a share, and its market cap surpassed the $175 billion mark. Around the same time that this disclosure hit the wire, Visa released a statement saying that it, along with MasterCard, had inked mobile pay deals in countries where phones far outnumber bank accounts. Africa’s growing mobile payment industry is the primary target and collaborating with Bharti Airtel, an African telecommunications company, seems like a wise move. These statements support our assertion that revenues and share net will advance by handsome strides out to 2018-2020, as is evident when looking at our Statistical Array.
Visa’s pristine balance sheet and financial strength have it postured in a superior position to a number of its peers. Investors need only look at the Capital Structure,Current Position, and Ratings boxes to see check its financial profile. Visa is debt free, having not had to dip into the debt markets since 2010, and has over $2 billion in cash on its books. Such impressive metrics gives this equity our top score for Financial Strength (A++) and our Highest (1) rating for Safety.
As one can see by using the Value Line report, V shares are a strong selection for most long-term portfolios. However, at this time, we do not think the price is at an alluring entry point. We would suggest interested investors wait for a more favorable quotation before committing funds.