Visa results, great company, great margins.

Yesterday, Visa, one of the most exciting companies around came out with quarterly earnings yesterday which beat consensus. Just for the record Visa have beaten estimates for every quarter since listing in March 2008. Either that is very impressive or analysts need to raise their game. That's not fair. Remember that these guys do not actually take any credit risk, it's the banks that do that. They are the ones sitting at the forefront of the evolution taking place in the way we pay for just about anything.

Let's take a look at the numbers. Earnings per share were up 34% compared to this time last year coming in at $1.27. Expectations were for $1.25. This came from revenue of $2.38bn whilst boasting an outstanding operating margin of 57.2% which was slightly below consensus of 57.5%. This was the fourth quarter release which gave us full year earnings of $5.18 giving the share a historic valuation of 17.7. Estimates for next year however come in at around $6 which gives us a forward PE 15.3. For a company with such exciting prospects, this looks cheap.

From $970bn of total payments (that is 3 times our annual GDP in 1 quarter!) $228bn came from US credit cards which showed a 10% increase and $288bn came from US debit cards which showed an 8% increase. This is the first time credit cards in the US showed faster growth than debit cards. This is because the new laws on swipe fees have incentivised banks to promote credit cards. Interesting. International credit payments amounted $369bn (up 25%) while debit card payments only amounted to $85bn (up 40%). As you can see debit cards are growing as developing nations adopt this newish method. They have a good mix between local and international income.

In terms of consensus the company seems positive. Not only are they issuing new cards but current holders are also spending more. I thought the consumer was finished? They fall in a space where people are shifting to their service more and more as cash becomes more of a liability. It is so much easier to pay by card. It is also a lot easier to use Visa if you travel abroad instead of dealing with foreign exchange and sitting on cash. Basically they make our lives easier and as consumers we barely notice the small amount they take each swipe.

At the same time the global population is growing and so is the middle class. This means more and more people will use their service. I can barely remember what a cheque book looks like, children being born now will look at cheque books like we look at the typewriter. Cards are the way of the future and when that shifts to something else like wallets on ones phone, Visa, with all their processing systems will be at the forefront of that to.