Visa (NYSE:V) is a global payments and technology company that connects consumers, financial institutions, and merchants. On July 24, 2013, the company reported fiscal third quarter earnings of $1.88 per share which beat the consensus of analyst estimates by $0.07. The company is scheduled to report fiscal fourth quarter earnings after the market closes on October 30. Since last writing about the stock back on September 13, the stock is up 7.47% and is beating the S&P 500, which has gained 3.74% in the same time frame. I currently hold Visa in my growth portfolio and with all this in mind I'd like to take a moment to evaluate the stock on a fundamental, financial, and technical basis to see if it's worth buying some more stock in the company right now.
The company currently trades at a trailing 12-month P/E ratio of 34.29, which is expensively priced, but I mainly like to purchase a stock based on where the company is going in the future as opposed to what it has done in the past. On that note, the 1-year forward-looking P/E ratio of 22.35 is currently fairly priced for the future in terms of the right here, right now. The 1-year PEG ratio (1.99), which measures the ratio of the price you're currently paying for the trailing 12-month earnings on the stock while dividing it by the earnings growth of the company for a specified amount of time (I like looking at a 1-year horizon), tells me that the company is fairly priced based on a 1-year EPS growth rate of 17.22%. The company has great near-term future earnings growth potential with a projected EPS growth rate of 17.22%. In addition, the company has great long-term future earnings growth potential with a projected EPS growth rate of 18.62%.
On a financial basis, the things I look for are the dividend payouts, return on assets, equity and investment. The company pays a dividend of 0.66% with a payout ratio of 23% of trailing 12-month earnings while sporting return on assets, equity and investment values of 14.9%, 20% and 7.5%, respectively, which are all respectable values but nothing to go writing home about. Because I believe the market may get a bit choppy here and would like a safety play, I don't believe the 0.66% yield of this company is good enough for me to take shelter in for the time being. In my last article I stated that you shouldn't be surprised if the company increased its dividend sometime in November and we got that raise… at 21% raise at that!
Looking first at the relative strength index chart [RSI] at the top, I see the stock coming down from overbought territory with a value of 62.01 and downward trajectory, which is a bearish pattern. To confirm that, I will look at the moving average convergence-divergence [MACD] chart next and see that the black line is above the red line (but reached an apex) with the divergence bars decreasing in height, indicating the stock may come up on some downward momentum. As for the stock price itself ($198.89), I'm looking at $202.96 to act as resistance and the 20-day moving average to act as support for a risk/reward ratio, which plays out to be -3.12% to 2.05%.
- The company declared a quarterly dividend of $0.40 per share for a 21.2% increase from the prior dividend of $0.33 with an ex-date of 29Nov13 and pay date of 03Dec13.
- The company has agreed to cut its credit card fees in France.
Visa is fairly valued based on future earnings and on future growth prospects (one-year outlook) with analysts expecting 17.22% growth in the coming year. Financially this is a solid company with no short-term or long-term debt; the dividend payout ratio is low based on trailing 12-month earnings. The technical situation of how the stock is currently trading is telling me we might be seeing some downward pressure for now. The near and long term double digit earnings growth rate are what I like about the company, but personally I'm not going to be buying right now. Right now I'm basically up on my position (+7.95%) and I will continue to hold onto the shares I have, reinvesting the dividends, but I like to see how earnings shake out before evaluating again.
Disclaimer: These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!
Disclosure: I am long V. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.