Finance giant Visa Inc. (V - Get Rating) gained 20.4% over the past three months despite a downward trending market. Over the past six months, the stock has gained 6.2% to close the last trading session at $223.00.

Despite the macro uncertainties and geopolitical turmoil, the company delivered steady revenue growth in the fiscal year 2022, supported by strength in consumer payments, resilience in e-commerce, and ongoing recovery in cross-border travel.

Moreover, the company has a large market share as it connects consumers, businesses, banks, and governments in more than 200 countries and territories.

“As we look ahead, while some short-term uncertainty exists, we remain confident in Visa’s long-term growth trajectory across consumer payments, new flows and value added services,” Alfred F. Kelly, Jr., Chairman, and Chief Executive Officer, Visa Inc., said.

In addition, the growth of the digital economy and digital payments is boosting V’s growth trajectory. The global digital payment market is expected to reach $228.37 billion by 2028 at a CAGR of 14.3%.

Here is what could shape V’s performance in the near term:

Solid Financials

V’s net revenues came in at $29.31 billion for the year ended September 30, 2022, up 21.6% year-over-year. Its non-GAAP net income increased 24% year-over-year to $16.03 billion, while its non-GAAP EPS came in at $7.50, up 26.9% year-over-year.

Favorable Analyst Expectations

Analysts expect V’s revenue to increase 8.7% year-over-year to $31.86 billion in 2023 and 11.8% year-over-year to $35.61 billion in 2024. Its EPS is expected to increase 10.3% year-over-year to $8.27 and 15.8% year-over-year to $9.58 in 2024.

Moreover, its EPS is expected to rise 14.9% per annum for the next five years. The stock surpassed EPS estimates in all four trailing quarters.

Robust Profitability

V’s trailing-12-month gross profit margin of 97.47% is 96.8% higher than the industry average of 49.53%. Its trailing-12-month EBITDA margin of 70.35% is 502.9% higher than the industry average of 11.67%. Moreover, its 51.03% trailing-12-month net income margin is substantially higher than the industry average of 3.22%.

Furthermore, its trailing-12-month ROCE, ROTC, and ROTA of 43.18%, 20.93%, and 17.49% compared with the industry averages of 4.75%, 3.21%, and 1.52%, respectively.

POWR Ratings Reflect Promising Outlook

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

V has an A grade for Quality, consistent with its higher-than-industry profitability margins.

It has a B grade for Stability, in sync with its beta of 0.94.

In the 48-stock Consumer Financial Services industry, V is ranked #6.

Click here for the additional POWR Ratings for V (Growth, Value, Momentum, and Sentiment).

View all the top stocks in the Consumer Financial Services industry here.

Bottom Line

V witnessed stable growth despite the macro headwinds. Moreover, Wall Street analysts expect the stock to hit $250.58 soon, indicating a potential upside of 12.3%. Given the stock’s robust profitability and favorable outlook, I think V might be an ideal buy.

How Does Visa Inc. (V) Stack up Against Its Peers?   

While V has an overall POWR Rating of B, one might consider looking at its industry peers, MainStreet Bancshares, Inc. (MNSB - Get Rating), EZCORP, Inc. (EZPW - Get Rating), and AssetMark Financial Holdings, Inc. (AMK - Get Rating), which also have an overall B (Buy) rating.

V shares . Year-to-date, V has gained 7.34%, versus a 4.01% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...

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