Despite the continued macroeconomic headwinds, payments technology company Visa Inc. (V) remained almost unaffected. Its payment volume and cross-border volume increased 12% and 40% year-over-year, respectively, in the fiscal third quarter ended June 30, 2022. Cross-border volume was the highest since the pandemic started in early 2020.

The company reported an overall robust financial performance in the quarter, with sustained growth in overall payments volume, and the stock has gained 6.1% over the past month. However, House Speaker Nancy Pelosi and her husband sold 10,000 shares of V worth between $1 million and $5 million in June.

Does the mega trader Pelosi’s action indicate V’s potential underperformance? Let’s see what could shape V’s performance in the near term:

Latest Developments

In May, V announced a partnership with Fundbox, an embedded working capital platform for small businesses, to strengthen Fundbox’s platform with the power of digital payments. The first step in this collaboration is the launch of the Fundbox Flex Visa Debit Card, issued by Pathward, N.A., which aids small business customers in better managing their cash outflows.

Robust Financials

V’s net revenue increased 19% year-over-year to $7.28 billion for the third quarter. Its operating income grew 2.1% from its year-ago value to $4.15 billion, while its non-GAAP net income came in at $4.21 billion, up 29% from the prior-year quarter. The company’s non-GAAP EPS rose 33% year-over-year to $1.98.

Strong Profitability

V’s trailing-12-month net income margin of 51.99% is significantly higher than the industry average of 4.41%. In addition, its trailing-12-month gross profit margin of 97.33% is 50.7% higher than the 92.07% industry average. Also, its trailing-12-month ROE, ROC, and ROA are 482.4%, 384.2%, and 505.9% higher than the respective industry averages.

Impressive Growth Prospects

Street expects V’s revenues to rise 15% in the current quarter, 20.4% in the current year, and 12% next year. The company’s EPS is expected to rise 12.3% in the current quarter, 21.3% in the current year, and 17% next year.

In addition, V’s EPS is expected to rise at an 18.2% CAGR over the next five years. Furthermore, the company has an impressive earnings surprise history; it topped the consensus EPS estimates in each of the trailing four quarters.

Consensus Rating and Price Target Indicate Potential Upside

Out of the 22 Wall Street analysts that rated V, 20 rated it Buy, and two rated it hold. The 12-month median price target of $257.18 indicates a 21.7% potential upside. The price targets range from a low of $204.00 to a high of $296.00.

POWR Ratings Reflect Solid Prospects

V has an overall B grade, which equates to a Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. V has a B grade for Quality, Stability, and Sentiment. V’s higher-than-industry profitability is consistent with its Quality grade. Its 0.90 beta is in sync with its Stability. In addition, the year-over-year growth indicated by the consensus earnings estimates justifies its Sentiment grade.

Among the 48 stocks in the D-rated Consumer Financial Services industry, VISA is ranked #6.

Beyond what I stated above, we have graded V for Growth, Value, and Momentum. Get all V ratings here.

Bottom Line

V’s robust financial performance, with an increase in payment volume and cross-border volume, has shown the company’s ability to remain resilient amid a slowing economy. Also, its higher-than-industry profitability and impressive growth prospects make it a solid buy right now.

How does Visa Inc. (V) Stack Up Against its Peers?

V has an overall POWR Rating of B, which equates to a Buy. Check out these other stocks within the Consumer Financial Services industry with B (Buy) ratings: Ezcorp Inc. Cl A (EZPW), Regional Management Corp. (RM), and Atlanticus Holdings Corporation (ATLC).

V shares rose $0.24 (+0.12%) in after-hours trading Tuesday. Year-to-date, V has declined -4.49%, versus a -13.45% rise in the benchmark S&P 500 index during the same period.

About the Author: Spandan Khandelwal

Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing. More...

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