Today’s stock pick of the day is a very well known brand; in fact, you could say they are one of the best known names for anyone who uses a credit card.
Let’s take a look inside our Stock of the Day pick:
Visa Inc.
Recommendation: Strong Buy
Consumer credit has been booming over the past several months, suggesting that the American consumer is making a comeback. At the nexus of this trend are the major U.S. credit cards, including Visa (NYSE:V), which is perhaps one of the most widely recognized credit card companies in the world.
Company Overview:
With operations in over 200 countries and the capability to handle over 24,000 transactions per second, Visa is a crucial player in the global credit card market. What’s interesting about Visa is that the company does not issue card itself, extend credit or set rates and fees.
Instead, the company uses its advanced processing network to connect consumers, businesses, banks and governments. The company basically promoted access to electronic payments. Even though its market cap is larger than competitors American Express (NYSE:AXP), Discover (NYSE:DFS) and MasterCard (NYSE:MA), Visa employs only 7,500 worldwide. By comparison, Discover has a workforce of 11,650 and American Express employs 62,500.
Industry Breakdown:
The Business Services industry is huge, with 419 companies, and so at No. 17 in terms of market cap, Visa is a big player. Visa also stands out in terms of its 0.70% dividend yield, which is the 23rd highest, and its long-term growth rate, which is 40th in the industry. The company’s Price/Earnings to Growth ratio is also 78th in the industry and Visa’s sales and earnings growth rank in the top quartile. As I mentioned earlier, Visa’s main competitors are American Express, Discover, and MasterCard. Of those, Visa scores right in the middle in terms of sales growth, gross margin and operating margin.
Earnings Buzz:
Visa’s next earnings announcement is scheduled for May 2, so there’s still plenty of time for analysts to reevaluate their estimates. As it stands, currently analysts forecast 10.3% sales growth from Visa, and 22% earnings growth. By comparison, the rest of the Business Services industry is headed towards 114.3% earnings growth but the Services Sector’s profits are expected to decline 91.6%. In the past three months, analysts have upwardly revised their earnings estimates by 3%. Visa Inc. has a history of very modest earnings surprises, so we’ll see in early May whether the company continues this trend.
Current Ratings:
Before you buy any stock, you should always run it through my free Portfolio Grader ratings system. This stock has improved significantly in the past 12 months; this time last year, this was a D-rated stock. Most notably, Visa Inc. has firmed up its fundamentals—the company earns B-ratings all down the line, including sales growth, operating margin growth and earnings growth. The only two fundamental metrics that Visa needs to improve are its earnings momentum and earnings surprises. Meanwhile, buying pressure for this stock remains high.
Bottom Line: Overall, Visa Inc. is an A-rated stock.
