Visa (V - Free Visa Stock Report) continues to be on a roll. As one of the top gainers of the Dow, shares of the electronic payment processing service provider have surged about 10% since the start of the year. The investment community has apparently been pleased with what it has seen so far, and it continues to keep the blue chip on its radar, with good reason. Indeed, investors applauded the company’s latest performance in the December quarter, as both revenues and earnings per share jumped 25% each from the year-earlier tallies. International-based business, which now comprises more than 60% of the company’s total volume, has been driving much of the growth lately.
Visa has also been raking in some extra bucks from Costco (COST), following the big-box retailer’s recent move to switch preferred credit card brands from American Express (AXP - Free American Express Stock Report), which charged higher transaction fees, to Visa, which is issued by Citigroup (C) and has virtually has no merchant fees. That’s translating to higher card usage for Visa, known for its catchy slogan of “Everywhere you want to be”. The company’s growth outlook seems quite encouraging, too, based on management’s expansion strategy, part of which calls for investment into the so-called digital wallet initiative, known as Visa Checkout. The service basically permits consumers to pay for purchases at participating retail websites using stored credit card information directly from their mobile devices, enabling for a quicker and more convenient online shopping experience.
So, what else makes Visa stock an intriguing selection, and to what type of investor is it best suited? While the short answer is that the Dow member is a good pick for select portfolios with an emphasis on long-term capital appreciation and safety, we will use our latest Value Line report, dated February 10, 2017, to explain why this is the case.
To be sure, there are several attributes that seem to stand out from the page. The price chart is one such eye-catching feature, which shows Visa shares on a general uptrend since the early part of the current decade in 2011. The stock’s price advance over the past few years largely reflects the company’s strong operating results and fundamentals, all displayed in the Statistical Array (located in the middle of the page). From the looks of it, revenues and profits have risen at a brisk pace. Chances are the world’s largest electronic payments processor and global ATM operator will register impressive gains going forward, too, as the Annual Rates box (to the left) indicates, with the analyst projecting hearty double-digit top- and bottom-line growth through the approaching 3- to 5-year time frame. Note that Visa scores a perfect 100 for Earnings Predictability (Ratings box in the lower right-hand corner), essentially leaving little to no room for surprises.
Visa stock is attractive from other perspectives, too. As shown in the Ranks section, the issue boasts our Highest rank for Safety of 1 (out of a range of 5), suggesting it is appropriate for the more risk-averse. What’s more, thanks to the company’s healthy balance sheet, which shows a manageable level of debt (representing 31% of total capital) and plenty of cash in the coffers (as illustrated in the Capital Structure and Current Position boxes on the left), Visa gets a superior mark of A++ for Financial Strength (found in the Ratings section). Other indicators in this part of the page should provide prospective investors with an added level of comfort, including the excellent grades the equity earns for Price Stability and Price Growth Persistence (both 90 out of 100). In fact, combined, these metrics help strengthen the case that the stock is not prone to price fluctuations, and, hence, makes a fairly good choice for conservative types.
Perhaps most appealing, however, is the issue’s worthwhile 3- to 5-year capital gains potential (Projections box). Yes, Visa is ranked 4 (Below Average) for Timeliness, implying that the equity’s performance is likely to lag that of the broader market in the year ahead. And the paltry 0.8% dividend yield (Top Label) is not a big draw, either, though the payout is projected to grow annually at a sturdy pace of more than 15% out to early next decade (as shown in the Annual Rates). However, as analyst Sharif Abdou suggests in the Commentary, “there’s a lot to like here from an investment perspective.” The blue chip would certainly fit the bill for anyone seeking an equity with solid, risk-adjusted appreciation prospects for the long haul.