Visa’s fast growth justifies its high valuation

Article Excerpt

VISA INC. $147 (New York symbol V; Conservative Growth Portfolio, Finance sector; Shares outstanding: 2.3 billion; Market cap: $338.1 billion; Price-to-sales ratio: 16.3; Dividend yield: 0.6%; TSINetwork Rating: Above Average; www.visa.com) operates the world’s largest electronic payments network to process credit, debit, prepaid and commercial transactions in over 200 countries. Its systems can handle over 65,000 transactions per second. Visa gets most of its revenue from fees it charges the card issuers and merchants who use its network. These are based on transaction volumes and other factors. In addition, it’s the banks—and not Visa—that are responsible for evaluating customer creditworthiness and collecting payments. Big acquisition fuelled revenue, earnings In June 2016, the company acquired affiliate Visa Europe from a group of European banks. Altogether, it paid $13.9 billion in cash and $6.1 billion in preferred shares. It will pay another 1 billion euros (or about $1.15 billion), plus interest, at the third anniversary of the deal in 2019. Thanks partly to this purchase, Visa’s revenue jumped…

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