Visa’s (NYSE:V) stock chart is almost boring to look at. Shares have been steadily climbing for several years now; there are little to no significant downtrends evident in the chart’s five-year view. And in 2018 thus far, V stock has gained over 22% — more than four times better than the broader market.
In its most recent quarter, the company’s adjusted earnings-per-share increased 30% year-over-year and beat Wall Street’s expectations by 9 cents and 9%. (GAAP net income increased over 500%, as special items affected last year’s numbers.) For the current quarter, earnings are slated to expand by 27%, according to Yahoo Finance, on the back 11% sales growth — about how much is expected annually for the next couple of years.
Visa reports earnings on July 26. Over the next five years, V is expected to grow its earnings by 18% each year — about in line with what it posted over the last half-decade. Once again, during that time, V stock stock has been apparently bulletproof. With similar growth on tap, is Visa a foolproof investment?
The Long-Term Story for V Stock
I’m a fan of Visa stock. It’s easy to kick yourself and wish you’d bought shares of Visa years ago, but I still don’t think these current levels should act as a deterrent for those who are new to the company.
No analysts have an underperform or sell rating on V stock, which is relatively rare.
Visa is one of the biggest names in the credit card space and it is only set to keep chugging higher as speculation of a cash-free society becomes increasingly plausible. In 2016, the Visa company we’re talking about here acquired Visa Europe, which had been a separate entity for years.
As MarketWatch aptly summarized, “The Visa Europe integration is part of the bull case for Visa’s stock, as some analysts see opportunity ahead as the combined company restructures arrangements and makes technological upgrades in Europe.”
More recently, news around V stock has focused on a merchant settlement. While competitor MasterCard (NYSE:MA), who is also involved, plans to take a very standard approach to paying the settlement (setting money aside for it), V has instead deposited $600 million into a litigation escrow account and it has an unusual structure where its Class B shares move in relation to the balance in that account.
That set-up, in my opinion, isn’t just unusual; it’s peripheral. The primary Visa stock bull case is about the company’s core business, which continues to expand without a hitch. Jim Cramer also recently noted that V doesn’t do business in China, which is actually good considering the looming trade war. I think that’s a bit of a red herring, too, though. With a stock like Visa, the solid history, unanimous analyst support, and overall growth should be enough. There is no news cycle to be concerned about. Visa’s foundation can’t be shaken by a settlement.
As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.
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