Visa – Don’t Miss This Huge Value Opportunity
The credit and debit card giant Visa (V) was the IPO of the last decade, but is it still a good value buy? The charts and some of the underlying financials seem to say it is, but there are those who have their doubts. After all, it is a little pricey for a value stock, particularly when you compare it to Discover (DFS), American Express (AXP), and MasterCard (MA).
Visa currently holds total cash of $2.30 billion and no debt. In its fiscal third-quarter earnings report, Visa reported a net loss of $1.8 billion on a GAAP basis, due to a $4.1 billion provision for a settlement agreement in a litigation case. Excluding this provision, net income for the quarter amounted to $1.1 billion, a 25% increase from the third quarter of 2011. When looking more closely, Visa saw payments volume growth of 11% for the fiscal quarter ended March 31, 2012, compared to the same quarter in 2011. This was followed by volume growth of 6% in the quarter ended June 30, 2012.
Discover reported net income of $537 million in the second quarter of 2012, compared to $600 million in the second quarter of 2011, equating to a 10.5% drop. Discover plans to report its third-quarter earnings on Sept. 27. American Express reported a slight increase in third-quarter net income of $1.3 billion, up 1% from the same quarter in 2011. Meanwhile, MasterCard reported net income of $713 million in the second quarter, a 17% increase from the same quarter in 2011. Visa currently has a P/E ratio of 65.23, compared to Discover at 8.93, American Express at 13.75, and MasterCard at 27.15. Visa is in great shape financially and investors are expecting high earnings growth from the company, but what does the market think?
At the end of business on Sept. 14, Visa was trading at $134, American Express was trading at $59.27 per share, and Discover was trading at $39.31 per share. Value investors will obviously say that Visa is no bargain, but it might be when you compare it to MasterCard, which was trading at $454.18 a share on Sept. 14. To continue reading, click here.