Visa is still growing. Visa still has room to grow

Visa released results two days ago, but less than 48 hours ago if you know what I mean. Here are the results for the full year and fourth quarter, downloadable from their IR site: Visa Inc. Reports Strong Fiscal Fourth Quarter and Full-Year 2013 Earnings. Nice. Mr. Market did not really think that the results were that great, the stock sold off post the results, there was obviously a little disappointment in the numbers.


It is an amazing company. In 2012 alone they processed 53.3 billion payments, up from 45.4 billion in 2010. Visanet in the last quarter alone processed 15.5 billion payments, bringing the total number of payments processed in the last financial year past to 58.472 billion, an increase of ten percent. That is a daily run rate of 159 million payments processed around the world. The network itself is capable of processing 30 thousand transactions a second. There are 2.159 billion Visa cards in the world, many people of course will have a debit and credit card, like I do and perhaps even more than one credit card. Not like I do! Ha-ha, one credit card I am told is one too many, but every now and again you do need it! So I guess Visa is really going places. If not there already.


Notwithstanding the lowering of the debit fees in the US in their 2012, which the company had anticipated and factored in, operating margins are absolutely fabulous for this business, the expectations for the year ahead are for those to be in the low 60 percent. Earnings per share for the full year were 7.59 a share, the earnings multiple is 33 times. The expectations are for earnings to grow in the mid to high teens, somewhere near 9 Dollars worth of earnings for the full year next year would be very good, that would lower the multiple to less than 23 at the current price. For a company growing at those sort of rates, that multiple is acceptable. Not cheap though, but you have to pay up for a fast growth business.


The dividend has recently been hiked by 21 percent to 40 cents a quarter, but that only translates to 0.81 percent at current levels. What is happening is that the company have embarked upon another share buyback of five billion Dollars, or around 3.3 percent of the current shares in issue at this price, 196.67 Dollars. If they keep this up for two decades (the buy backs) and the share price goes nowhere, there will be nothing left. Nothing like that will happen of course. Sorry, that was just dumb.

So what is the investment case for Visa? In their last annual report it was simple enough: "Electronic payments are rapidly expanding around the world, taking root in emerging markets and allowing more people to enjoy the benefits of financial inclusion. We fully expect these changes to continue, marking the beginning of another wave of growth for electronic payments." This image was captured from a paper titled Leaving Cash Behind.


What it is E-payments as a Percentage of Total Payment Transactions, 2009.

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