A Closer Look At Visa’s Valuation

+5.71%
Upside
285
Market
301
Trefis
V: Visa logo
V
Visa

Visa (NYSE: V) has performed strongly over the past few years. The company reported record revenue (+24% year over year) and earnings throughout fiscal 2017, which ended on September 30. This strong performance has been reflected in the company’s stock price, which surged by around 45% in 2017. Visa is in an extremely strong position operationally. It has huge scale, as its credit and debit cards are accepted almost universally, a large number of co-branding partners, and its cards in circulation and volume of transactions processed far exceed those of its rivals.

Our price estimate for Visa’s stock stands at $96, which is below the market price following the massive rally in 2017. We have also created an interactive dashboard which shows our forecasts and estimates for the company going forward; you can modify the key value drivers to see how they impact the company’s revenues, bottom line and valuation.

Expanding coverage and increased uptake of cards should drive transactions processed and revenues.

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Growth in international consumer spending and Visa’s international expansion should propel international transaction fees.

Increased acceptance of Visa cards and growth in assessment fee should drive revenue.

We expect 18% growth in revenues due to shift towards digital transactions and Visa’s leading position. Rebates should remain around current levels.

We expect absolute growth in expenses due to expanding coverage and technology enhancements. Substantial growth in revenue should drive EBITDA.

We have used a P/E ratio of 21 for our valuation estimate, but you can modify the multiple in order to come up with your own valuation estimate for the company.

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