Should Investors Reassess Visa After Recent 3.4% Dip and Solid Long-Term Growth?

Feeling stuck on what to do with Visa stock? You are not alone. Whether you already own a few shares or are considering buying in, it is smart to step back and ask if today's price actually makes sense. Visa has weathered a recent dip, slipping 3.4% over the last week and down 1.4% for the month. Still, if you zoom out, the story changes: year-to-date, Visa is up 6.7% and over the last five years, it has delivered a solid 75.6% return. Clearly, this company can power through short-term setbacks, often bouncing back stronger as global spending and digital payment adoption continue to rise.

Of course, markets do not just move on momentum. Lately, shifts in investor sentiment around payment technologies and competitive fintech innovations have shaped how people view risk in this space, especially for a dominant player like Visa. That begs the question— is Visa undervalued, fairly valued, or even pricey at its current $335.4 closing price? According to six major valuation checks, Visa scores a 0 out of 6 for being undervalued, suggesting its shares might not be the bargain some investors are hoping for.

That does not mean the story is over. In the sections ahead, we will break down each valuation approach so you can see exactly how Visa stacks up and hint at why understanding the limitations of these checks could unlock a smarter, more confident investing decision.

Visa scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Visa Excess Returns Analysis

The Excess Returns valuation model centers on how efficiently a company turns invested shareholders’ capital into ongoing profits that exceed the basic cost of equity. For Visa, this approach uses projected future Return on Equity and Book Value to estimate how much value the business is likely to generate above a simple “safe” investment, like government bonds.

Key figures for Visa showcase a strong profile. The company’s current Book Value per share is $19.58, with a projected “stable” Book Value of $20.84 based on the consensus of 7 analyst estimates. More notably, Visa’s stable Earnings Per Share (EPS) is estimated at $14.74, calculated from the weighted future Return on Equity assessments of 10 analysts. The expected average Return on Equity is an impressive 70.72%, while the cost of equity comes in at just $1.55 per share. That leaves Visa with a robust annual excess return of $13.19 per share.

According to this model, Visa’s intrinsic value lands at $323.36 per share, just 3.7% below its closing price of $335.40. This margin falls well within the wiggle room of any valuation approach and suggests that the stock is trading more or less in line with its underlying value.

Result: ABOUT RIGHT

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Visa.

Simply Wall St performs a valuation analysis on every stock in the world every day (check out Visa's valuation analysis). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes.

Approach 2: Visa Price vs Earnings

The Price-to-Earnings (PE) ratio is a popular way to value profitable companies like Visa because it directly compares a company's share price to its earnings per share. This metric helps investors gauge how much they are paying for each dollar of earnings, making it especially relevant for businesses with consistently strong profits and well-established operations.

Growth expectations and risk play crucial roles in determining what counts as a "fair" PE ratio. Investors tend to reward companies with reliable earnings growth and lower risk with higher PE multiples, while sectors or companies facing more uncertainty typically trade at lower PE ratios.

Visa’s current PE ratio sits at 32.2x, notably above the Diversified Financial industry average of 15.7x and its peer group’s average of 21.1x. However, numbers like these can be misleading if taken at face value. Fast-growing, high-quality businesses often deserve richer valuations.

This is where the Simply Wall St "Fair Ratio" comes in. Visa’s fair PE ratio, based on proprietary analysis that factors in not just industry averages but also the company’s growth prospects, profit margins, market cap, and risks, is 23.3x. This tailored benchmark is more insightful than a simple comparison with peers because it accounts for specifics that truly drive value.

With Visa’s actual PE ratio at 32.2x and the Fair Ratio at 23.3x, the stock appears somewhat richly priced relative to its fundamentals and outlook.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Visa Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is much more than a number; it’s your story, your big-picture perspective on a company, based on your own estimates of its future revenue, earnings, and profit margins.

With Narratives, you link how you believe Visa’s business will grow with specific financial forecasts, translating your viewpoint into an estimated fair value for the stock. These Narratives are easy to create and explore directly on Simply Wall St’s Community page, making them accessible to millions of investors worldwide and allowing you to connect your beliefs to real data without complex tools.

The strength of the Narrative approach is that it helps you decide whether to buy, hold, or sell by continually comparing your Fair Value with the live market Price. The Narrative updates automatically whenever news, results, or regulation shift the outlook for Visa.

For example, some investors see Visa’s regulatory headwinds and mature markets capping future returns, assigning a fair value near $243 per share. Others expect global digital adoption and remittance growth to push the stock as high as $430. Your own Narrative puts you in control of where you think Visa is really headed.

For Visa however we'll make it really easy for you with previews of two leading Visa Narratives:

🐂 Visa Bull Case

Fair Value: $391.46

Currently 14.3% undervalued

Revenue growth rate: 10.1%

• Digital adoption, e-commerce, and emerging markets are expected to grow payment volumes and drive long-term revenue growth for Visa.
• Expansion into value-added services and cross-border solutions increases higher-margin revenue streams and supports profit margins.
• Analyst consensus expects earnings to rise to $27.5 billion by 2028 and sets a price target 12.1% above the current share price, while also acknowledging regulatory, competition, and technology risks.

🐻 Visa Bear Case

Fair Value: $243.09

Currently 38.0% overvalued

Revenue growth rate: 9.1%

• Though Visa benefits from digital payment growth and global reach, regulatory and competitive pressures are likely to limit profit margin expansion and earnings growth.
• The Credit Card Competition Act could significantly erode the company's margins and disrupt its dominant market position if passed.
• This outlook foresees long-term PE multiple contraction and expects Visa to struggle to capture above-trend growth as global markets mature, with a fair value well below the current market price.

Do you think there's more to the story for Visa? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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