Stock Analysis

Do Visa's (NYSE:V) Earnings Warrant Your Attention?

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NYSE:V
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The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Visa (NYSE:V). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Visa with the means to add long-term value to shareholders.

Check out our latest analysis for Visa

Visa's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Visa has managed to grow EPS by 20% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. While we note Visa achieved similar EBIT margins to last year, revenue grew by a solid 11% to US$33b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

earnings-and-revenue-history
NYSE:V Earnings and Revenue History December 10th 2023

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Visa's future profits.

Are Visa Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$514b company like Visa. But we are reassured by the fact they have invested in the company. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$234m. We note that this amounts to 0.05% of the company, which may be small owing to the sheer size of Visa but it's still worth mentioning. This still shows shareholders there is a degree of alignment between management and themselves.

Is Visa Worth Keeping An Eye On?

You can't deny that Visa has grown its earnings per share at a very impressive rate. That's attractive. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Visa's continuing strength. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. You should always think about risks though. Case in point, we've spotted 1 warning sign for Visa you should be aware of.

Although Visa certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Valuation is complex, but we're helping make it simple.

Find out whether Visa is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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