Visa currently passes my performance test. The performance is there, at least for now. Will it continue in the future? Of course, nobody knows for sure, but we can look to its current valuation for some valuable clues.
Valuation: When I write articles on Visa, I write about both the performance and valuation of the stock. I am not a pure value investor, nor am I a pure performance investor--I like to combine them both.
There are a lot of seemingly cheap stocks out there that are nothing more than value traps. There are also numerous "hot" performers that are way overvalued that investors need to be careful with.
I like to combine both of these investment styles in the stocks that I invest in.So now let's look at the valuation of Visa. Data from Best Stocks Now App Visa is currently trading at 20.7 times forward earnings. This number sounds a bit rich, but Visa has been growing its earnings over the past five years at almost 30% per year so it is still trading at a discount to its past growth rate. Furthermore, Visa is expected to grow its earnings by 18.6% per year over the next five years, so it is trading at a PEG ratio of 1.11. This is not an outrageous valuation nor is it the cheapest stock in the world. When I carry out Visa's earnings estimates over the next five years and I apply a multiple that I think is appropriate for a credit card company, I come up with a valuation of $355 per share. The stock is currently trading at only $182. Visa currently passes my valuation test. Stock chart: In addition to performance and valuation, I also like a good, healthy stock chart. When I bought Visa last June, it had a great chart. I am up 45% since that purchase. While Visa has had a very dull chart recently. It has not been bad enough to cause me to sell the stock And Visa's stock chart is really perking up again! Courtesy of StockCharts.com
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV