There’s no denying that Visa (V - Free Visa Stock Report), one of the three newest members to join the Dow, has been quite popular among investors. One need only look to the equity’s price history to realize this. In fact, Visa shares have been on an overall steady ascent in recent years, and they are likely to climb further over the long haul. Here, we point out what makes Visa stock an intriguing choice for select portfolios, with an emphasis on long-term capital appreciation and income, as well as safety.
Visa has long been considered a household name in the financial services space. In its present-day configuration, the company came about from the merger of Visa USA, Visa International, Visa Canada, and Inovant in 2007. As the world’s largest provider of retail electronic payment processing services and operator of a vast global ATM network, Visa offers a range of credit, debit, prepaid, and commercial payment solutions and products principally under the Visa banner. This and other data can be found in the Business Blurb section of the Value Line page (center).
To be sure, there are several attributes that seem to jump out from our report on Visa. The price chart is one such eye-catching feature. Indeed, Visa shares have been on a general uptrend since the early part of the current decade, shortly after the economic recession ended in 2009. The stock’s price advance over the past three-plus years largely reflects the company’s strong fundamentals, which can be easily viewed in the Statistical Array (located in the middle of the page).
From the looks of it, revenues and earnings have risen at a brisk pace, thus far. And chances are the electronic payments processor will register impressive gains going forward, too. Note that Visa scores a perfect 100 for Earnings Predictability (Ratings box in the lower right-hand corner), essentially leaving little or no room for surprises. According to analyst Sharif Abdou’s estimates, another record-setting year appears to be on tap for fiscal 2014 (ends September 30th). As discussed in the Commentary section, despite a reduced top-line outlook, a double-digit increase of 10% still seems doable for this year, while share earnings are likely to rise more sharply.
And as the Annual Rates box (to the left) indicates, top- and bottom-line growth figures to be quite hearty through the upcoming 3- to 5-year timeframe. The analyst explains in the Commentary that much of the growth will likely be driven by an expanding international footprint (where foreign business now accounts more than 45% of revenues), as well as a larger debit card business.
Visa stock is attractive from another standpoint, too. Indeed, the issue boasts our Highest rank for Safety of 1 (out of a range of 5), suggesting it is suitable for the more risk-averse. What’s more, thanks to the company’s pristine balance sheet, which is debt-free but cash-heavy (as illustrated in the Capital Structure and Current Position boxes on the left), Visa gets a superb mark for Financial Strength of A++ (found in the Ratings box). This should provide an added level of comfort for prospective investors.
That’s not to say that the stock is not at all volatile. True, the stellar Safety rank is a definite positive. But other indicators could be better. A modestly below-market Beta coefficient (Ranks box) and somewhat uninspiring marks for Price Stability and Price Growth Persistence (Ratings section) essentially imply the equity is not entirely immune to price fluctuations. Nonetheless, Visa is a fairly good pick for conservative types.
Perhaps most appealing, however, is the issue’s 3- to 5-year capital gains potential and annual total return prospects (Projections box). Indeed, although Visa is ranked 3 (Average) for Timeliness, the equity offers compelling appreciation potential for the long term, based on the analyst’s projections out to late decade. The income component adds appeal, too. While the dividend yield (Top Label) of 0.9% is modest at the recent quotation, the payout is projected to grow annually at a remarkable pace of nearly 25% in the coming years (as shown in the Annual Rates). As Mr. Abdou concludes in his write-up, “the recent retreat presents a nice entry point, in our view”.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.