Does Visa Deserve Its Bullish Valuation?
Visa (NYSE: V) leads the global digital payment market with a secure payment network that is capable of processing over 65,000 payments per second. The company does not extend loans or credit but offers a technology platform that allows financial institutions and vendors to transact with credit, debit, and gift cards. The company has issued bullish guidance for next year, indicating internal optimism about the growth prospects in the near term. Is this war-on-cash stock worth buying at today's price?
Visa stock currently trades at 30.3 times forward earnings and 35.5 times free cash flow, which are slightly lower than peers such as Paypal and Mastercard, but much higher than American Express. Visa's EV/EBITDA ratio of 26.9 follows a very similar pattern. Analysts are forecasting 15% annual earnings growth over the medium term, resulting in a PEG ratio of approximately two. This battery of valuation metrics suggests that Visa is priced in-line with peers based on multiple profitability measurements, even when adjusting for variations in growth outlook and capital structure.
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Source Fool.com
