Visa inc. delivers another beat

One of my favourite companies, Visa came out with their quarterly earnings after the market closed last night. It's not hard to explain why this company is a favourite. People are changing their payment methods from cash and checks to plastic and Visa are one of the ones who make this possible. They have built processing networks which are capable of handling more than 20 000 transactions per second. They do not issue cards or credit and are not exposed to any of that risk. Instead they charge fees for processing transactions made on their own cards.

Governments around the world have also utilised Visa's services after switching to digital currency in order to increase efficiency and lower costs. These days with mobile phones, digital currency is as accessible to someone sitting in their New York apartment as it is to someone watching over their herd on the plains of Kenya.

Let's take a look at the numbers. The company posted a profit of $1.01 billion or $1.43 per share for the quarter. This showed growth of 40% from last year's comparable period. Goldman reckon they will make $5 this full year although I would imagine that would be upgraded following this earnings beat. The share trades at $88 so we looking at a forward PE of around 17.6. Not cheap but considering the potential of the company, not expensive by a long way.
Remember that last month the share traded at $75 and then took a 15% leap after swipe fees were capped at favourable rate. Another important factor to note is that these profits came from revenues of $2.32bn. That's a net profit margin of 43.5%. Amazing. So basically they have the networks and infrastructure set in place and now they just print money.

What does the future look like? CEO Joseph Saunders said that the company is spending a lot of money on innovation. The company plans to launch a digital wallet which will allow customers to pay for goods using their smart phones instead of a chip based card. Remember they bought that company Fundamo, a mobile payments company in developing markets.

Another interesting figure is that international revenues jumped 15% to $662mil, 28.7% of total revenue. This is a huge growth area for Visa who are focusing on building their international business. They have a minority share holding in the separate Visa Europe which explains why the US is such a big revenue driver but it is the developing countries that they are interested in. As populations increase and people grow their wealth the Visa service will be used more and more. At the end of the day they make our lives much easier so why wouldn't you use their service? I would definitely be adding at these levels.