Visa: Attractive Growth, But This Dow Stock Is Too Expensive Today

Visa (V) is one of the largest companies in the intersection between technology and finance. The payment technology company operates globally, and it has been creating highly compelling earnings-per-share and dividend growth rates since the company’s IPO a little more than a decade ago.

Since its IPO, Visa has grown into one of the largest financial-services stocks in the world. It is also a member of the Dow Jones Industrial Average, a group of 30 of the largest U.S. businesses.

The growth outlook for the coming years is highly favorable as well, as we expect double-digit earnings-per-share growth, but right now Visa is still not a buy, as shares are trading at a valuation that we deem too expensive.

Visa is a leader in its industry, it has very strong fundamentals, including high returns on capital and a superb balance sheet, which is why its overvaluation is the only major negative we are noting.

We believe that Visa would be a strong buy at our price target around $120. However, Visa’s shares should not be bought at the present level, even though Visa has among the strongest growth outlooks in the Dow Jones Industrial Average.

Business Overview

Visa is a payment technology company that transfers information between consumers, merchants, financial corporations, businesses, and other partners. The company, which operates in more than 200 countries around the globe, is the leader in digital payments through its VisaNet processing network.

Visa’s network enables the authorization, clearing, and settlement of payment transactions. Visa offers additional services such as fraud protection to consumers as well as to business customers, and it offers card products itself as well.

Visa was founded in 1970 but had its IPO in 2008. Thanks to its strong growth rates and market leadership position it commands a large market capitalization of $386 billion. Visa is headquartered in San Francisco, CA.

Since its IPO in 2008 Visa has generated highly attractive returns, and vastly outperformed the market. This was also true for the last five years, during which Visa has generated total returns of more than 200% cumulatively.

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