Why Visa Commands Premium Valuations in the Payment Industry



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Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master’s in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem. Click here for a two-week free trial so we can help you achieve better long-term total returns and your financial dreams.

  1. Thankfully, one of my favorite dividend growth stocks is still trading with an attractive valuation attached.
  2. Analysts expect growth to increase in 2025, and we could see a strong top-line growth.
  3. Where it gets tricky is that if you’re making an international purchase in a store today, it might not be processed immediately.
  4. Credit card companies supposedly were losing against so-called disruptive tech companies, which includes a wide range of fintech players including PayPal, Block (SQ), and many buy-now-pay-later companies.
  5. It seems to be pretty clear that PayPal and other fintech companies are now feeling a pandemic hangover similar to what Netflix (NFLX) has been experiencing.

However, if you get caught out by dynamic currency conversion (or DCC for short), the exchange rate used might not be the one Visa sets. Nonetheless, it’s helpful to know the indicative exchange rate used by Visa, so you can compare it with the a fair rate online. This is the only real exchange rate, and the best benchmark to make sure the Visa rate is fair. What’s more, of the few retailer traders who engage in forex trading, most struggle to turn a profit with forex.

This was implemented as a security feature – true holograms would appear three-dimensional and the image would change as the card was turned. At the same time, the Visa logo, which had previously covered the whole card face, was reduced in size to a strip on the card’s right incorporating the hologram. Today, cards may be co-branded with various merchants, airlines, etc., and marketed as «reward cards». For the fiscal year 2022, Visa reported earnings of US$14.96 billion, with an annual revenue of US$29.31 billion, an increase of 21.6% over the previous fiscal cycle. Paying a little over 30x net profits for a company that is growing its revenue at a 25% rate is not a bad deal, I believe.

Because so much of currency trading focuses on speculation or hedging, it’s important for traders to be up to speed on the dynamics that could cause sharp spikes in currencies. While Visa is larger in terms of transactions, purchase volume, and cards in circulation, Visa and Mastercard have nearly identical global merchant acceptance footprints. Visa has a set of rules that govern the participation of financial institutions in its payment system. Acquiring banks are responsible for ensuring that their merchants comply with the rules.

Card design

Call it what you will, but this bullish momentum in the stock market is making it hard to go shopping. The company has taken on a debt of about $16 billion to fund its acquisition of Visa Europe. The company’s stand-alone valuation gap has increased marginally due to the relatively low performances of its competitors. Together, these companies account for 2.3% of the Technology Select Sector SPDR ETF (XLK). We’d like to share more about how we work and what drives our day-to-day business. Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams.

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Overall, we can say that Visa is not a cheap stock in absolute terms. But based on the overall quality of the company and its compelling growth, the current valuation should be justified. Visa also trades at a discount compared to how the company was valued in the past, at around 10%-15% when we look at the average between the P/E discount saxo forex broker and the EV/EBITDA discount. Visa could thus have double-digit upside potential in the near term, on top of its more pronounced longer-term upside potential from business growth and shareholder returns. Visa’s (V) stock has risen 11% over the past 12 months as a result of strong growth in volumes and the addition of new clients in 2Q17.

Visa posts earnings beat, but here’s why Wall Street says the stock is falling

However, the company still has to have a fully profitable year, but it could be heading there. If it can continue with the strong user growth, we could see the company report exceptional numbers. This year could be transitional for the company, and as the economic conditions improve, SoFi will keep soaring. Wise is the trading name of TransferWise, which is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011, Firm Reference , for the issuing of electronic money. Which means you need to make sure that the date you enter into the calculator is the date on which the transaction is processed.

The company is gaining ground through more partnerships and co-branded cards, but the market is expected to be more competitive on the pricing front as companies cut costs. DCC is where you’re asked if you’d like to pay for your transaction in your home currency instead of the local currency. If https://forexhero.info/ you say “Yes,” it’s the ATM provider, merchant, or an intermediary bank who decide the exchange rate which is used. Check out your account terms and conditions, or the fees and charges section on your online banking, to make sure you know the costs related to your Visa credit or debit card.

New Strong Buy Stocks for February 23rd

Tesla is expected to post earnings of $0.67 per share for the current quarter, representing a year-over-year change of -21.2%. Over the last 30 days, the Zacks Consensus Estimate has changed -29.9%. In irregular migration, the entry is illegal because it was done without the appropriate visa or travel document or done for a non-work-related purpose. In 2002, the European Commission exempted Visa’s multilateral interchange fees from Article 81 of the EC Treaty that prohibits anti-competitive arrangements.[93] However, this exemption expired on December 31, 2007. In the United Kingdom, Mastercard has reduced its interchange fees while it is under investigation by the Office of Fair Trading. Revenue was up by a hefty 25%, and earnings per share rose by an even better 30%, with the outperformance primarily stemming from share repurchases that reduced Visa’s share count.

Zacks Mobile App

And looking at the company’s earnings growth rate expectations and payout ratio (just 23.7%), I think annual dividend growth in the ~15% range is sustainable over the next 3-5 years (at least). At that rate, the size of Visa’s dividend will double every 4.8 years. For hundreds of individuals and merchants, PayPal is the first choice for payment, and this is how the network has been getting stronger over the years. Already a leader in the business, PayPal knows it can survive the macroeconomic conditions. Trading at $58 today, the stock looks very cheap to me and is down 22% in the past year. The stock is trading much lower than $79, which is your chance to make the move.

But as we see now, that narrative doesn’t really hold – it’s the disruptors that see their shares slump in recent months, and it is Visa and Mastercard that deliver excellent and estimates-beating results. Thankfully, one of my favorite dividend growth stocks is still trading with an attractive valuation attached. It’s up more than 380% during the past decade (crushing the S&P 500’s 159.6% gains). And moving forward, I expect to see this outperformance continue because of the stock’s outsized growth prospects. Discover the best debit card to use abroad in our comprehensive guide. We review 6 top UK debit cards with zero foreign transaction fees, perfect for explorers.

Instead, Visa benefits from more spending in the real world, as consumers are traveling more, spending more at brick-and-mortar retailers, dining out more, and so on. The issuing financial institution sets the payment card’s terms and conditions, including fees, rewards, and other features. (Retailers usually work with a third-party financial institution.) For credit cards, the issuing bank is responsible for underwriting, interest rate structuring, and the full development of rewards programs. Currencies are traded in the foreign exchange market, a global marketplace that’s open 24 hours a day Monday through Friday. The strong US dollar could impact Visa’s revenue growth by 3% in fiscal 2016.

Most forex trades aren’t made for the purpose of exchanging currencies (as you might at a currency exchange while traveling) but rather to speculate about future price movements, much like you would with stock trading. Similar to stock traders, forex traders are attempting to buy currencies whose values they think will increase relative to other currencies or to get rid of currencies whose purchasing power they anticipate will decrease. Foreign exchange trading—also commonly called forex trading or FX—is the global market for exchanging foreign currencies. Forex is the largest market in the world, and the trades that happen in it affect everything from the price of clothing imported from China to the amount you pay for a margarita while vacationing in Mexico. No investment decision can be efficient without considering a stock’s valuation. Whether a stock’s current price rightly reflects the intrinsic value of the underlying business and the company’s growth prospects is an essential determinant of its future price performance.

While there are talks that the Capital One and Discover deal will threaten Visa’s business, I disagree. Visa is already an established and highly trusted name in the fintech industry. It has been investing in building a strong services platform and has acquired Pismo recently. The company plays a huge role in the global fintech environment, and its cross-border solutions are proof of the same.

This structuring and reporting is one of the biggest differences between the two largest network processors. Visa and Mastercard do not issue cards directly to the public but rather through partner member financial institutions such as banks and credit unions. The member financial institution then issues cards for individuals and businesses, either directly or in partnership with airline, hotel, or retail brands. According to the Federal Reserve’s 2020 Diary of Consumer Payment Choice survey, 42% of Americans preferred to pay bills with a debit card, while 29% used a credit card, meaning that 71% had at least one or the other.