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Opportunity Arises for Investors By TipRanks

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© Reuters. For Investors: Visa Stock

Visa (NYSE:)  operates as a digital payments service provider.

Global commerce is also supported by the company through the exchange of information and value amongst its global network, which includes consumers, government agencies, financial institutions and businesses.

The V stock is a good investment for me.

Historische Outperformance Should Not Be Stopped

Ten years ago, a $10,000 investment in Visa returned more than $117,000 including dividends. It is a return on investment of almost 28% at a compound annual rate (CAGR). An identical investment in ETF Trust SPY would net just $48,000.

Operating revenues have increased each year during this period, up to 2020 when the pandemic was over.

The company’s revenues have increased by over 50% in the past 5 years and EBITDA more than 70% over that period.

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Opportunity presents itself

As international travel and other activities slowed, Visa’s growth was hampered by the pandemic. Credit card companies are very profitable in cross-border transactions, so profits were reduced.

However, dilutedEPS was stable at $4.95 for the trailing 12 month (TTMs) after last earnings report.

Strong share buyback programs will assist future earnings per share. Visa has bought back more than $7 billion of stock in the TTMs. Board of Directors has approved an additional $8 billion for the buyback program. This is expected to continue.

Stock has fallen from its all-time highs and is currently trading at 9.9% of the July 2021 highs. This discount might not be significant but Visa isn’t a stock that goes on sale often. One reason Visa is a key part of any portfolio is profitability.

MarginExceptional

Visa’s success is based on profitability. It has an EBITDA margin in excess of 70% and an operational margin exceeding 64%. This is in contrast to Alphabet (NASDAQ) and Apple (NASDAQ) which are highly profitable companies.

Google and Apple report margins on EBITDA of 34%, 32% and 32%, respectively. They are between 25 and 28 percent for operating margins. Although these are impressive figures, Visa’s profitability is far better.

Visa was able to make $13.35Billion or $5.91 per Share in cash through operations that took place over the TTMs. Visa offers a unique advantage in addressing inflation. Credit card transactions generally have a percentage basis, which means that revenue is affected by changes in prices.

This provides investors with an added inflation hedge and a stock which historically has outperformed the market.

Wall Street’s Take

Wall Street analysts have a strong opinion on Visa stock. They give it a Strong Buy consensus rating based on 19 Buys, one Hold and no Sell recommendations.

The average Visa price target of $280.75 implies 25.2% upside potential.

Summary of Visa

Visa stock is not usually on sale. The exception is the pandemic, which along with other macro trends has allowed for a 11% decrease in July 2021’s highs.

These are not going to be around for long. Because of its extraordinary profitability, inflation protection and strong buyback program, Visa will again be a popular choice for investors.

Disclosure: Bradley Guichard was a shareholder in the securities discussed in this article at publication.

Disclaimer: This article is solely the author’s opinion and does not reflect the opinions of TipRanks and its affiliates. It should only be used for informational purposes. TipRanks cannot guarantee the reliability, completeness or accuracy of any information. This article is not intended to be interpreted as an offer or recommendation for the purchase or sale of securities. This article is not intended to provide advice on legal, investment or financial matters. TipRanks, its affiliates, disclaim any liability or responsibility in relation to the content. You are responsible for your actions based upon the articles. TipRanks and its affiliates do not endorse or recommend this link. Performance in the past is no guarantee of future performance, price or results.



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