Visa. Really going places.

Last night after the market closed, Visa reported full year numbers which beat expectations. This stock has been one of our best performers. It is up 45% in a year and has nearly doubled since June last year. Like all companies it comes with some risks but there is no doubt this is a fantastic business, sitting in a sweet spot as our globe shifts from cash to plastic. According to the website Visa processes more than 10 000 transactions a second in over 200 countries around the world. But at current levels is it a good investment? Let's look at the numbers.


These numbers are quite complicated because the year included lots of once offs. A big litigation provision and various tax reversals had to be excluded which meant earnings for the year came in at $4.2bn or $6.20 per share. For the quarter per share earnings came in at $1.54 verse expectations of $1.50. The stock is up 1.8% pre market and is looking to open around $141. As you can see immediately, this share is expensive trading on 22.7 times historic earnings. Earnings for next year however are expected to come in at $7.18 showing growth of 16%.


So does the future of this company look bright enough to justify its share price and make it a good investment going forward? This company is not a credit provider, it owns and operates the infrastructure to process payments electronically whether it be by card, mobile or online. This infrastructure has the capacity to process 24 000 transactions a second with fraud protection for clients and guaranteed payment for merchants. Their efficiency is vital.


The company has two massive growth kickers. The first one is with existing clients. As people get richer they spend more, plain and simple. The second one is the adoption of electronic payments over cash. The penetration is less than you think. If you are reading this message the chances are you live a very much first world based lifestyle where electronic payments are the norm. The truth is that more than 80% of transactions are still cash!

Globally they are diversifying in the right places. Naturally their services will be required where the growth is happening. The efficiency their systems bring to the market is vital for any country to grow. Transporting physical cash is dangerous and slow. We know this very well in South Africa. They also make life easier for travellers. Gone are the days of traveller cheques, just draw with your Visa card.


Below is the breakdown of their payments volume geographically. As you can see, still dominated by the US. This is a good thing. Firstly because the US economy is showing good signs of strength and secondly it shows more room to grow globally. If you are wondering where Europe is, they have franchised that region and take an annual licensing fee. $704 million was extracted from Europe which showed a 7% growth from last year. You see electronic payments are government friendly especially for tax evasive nations.

The systems are in place and the demand is there. This company along with a few competitors are changing the way we consume. We continue to add to this game changer.