Why Invest in Visa Inc (V)? 2012 Stock Price Outlook and Peer Comparison

Visa’s stock (V) got listed back in 2008 and since then it has generated consistent returns for investors. Since its listing the stock has given 70 percent return, and the best part is that it’s making new highs even in current market scenario. Now, in order to have a clearer view on this stock the investors should ask these questions:

Will Visa (V) continue with its outperformance in 2012?

How strong are Visa’s (V) fundamentals when compared to its peers and competitors?

What is the best price to invest in Visa’s stock (V) and what kind of returns can one expect in 2012 and in years beyond?

Before we jump to making stock price forecasts for 2012 lets understand this company’s business, and figure out its strengths and weaknesses. Later in this post, we will dig down the financials, growth and valuations of this business.

SECTOR: Finance

INDUSTRY: Finance/Rental/Leasing

Visa Inc (V) has the largest market cap in its industry, and they enjoy a highest P/E ratio among their peer group and competitors. At present their P/E ratio stands at 28.7 and their market cap is around $53.5 billion.

Visa surely has a strong fundamental base, and they are a competitive player in their industry. Now, let’s compare their market capitalization and P/E ratio with some of the closest competitors in the industry.

• Mastercard Inc (MA) has market cap of around $46 billion and the P/E ratio stands high at 21.2
• Capital One Financial Corp (COF) has a market cap of around $19.8 billion but it trades at comparatively cheaper P/E ratio of 5.6
• Discover Financial Services (DFS) has a market cap of around $13.5 billion and trades at a P/E multiple of 6

 

Take a look at one year stock price comparison chart of all the companies mentioned above.

Understanding the Business of Visa Inc      

Visa, Inc. is an international financial service provider that brings together various multinational banks and financial institutes with businesses, consumers, government, and private institutions. Enabling cashless (and cheque-less) monetary transactions, Visa Inc has simplified the processes and procedures for making payments and receiving funds. VisaNet, from Visa Inc is an international transaction processing platform that provides transaction-based services to financial institutions and merchant customers. Additionally, their value-added services that include fraud protection, risk management, dispute management, loyalty, and debit issuer processing.

Furthermore, it makes available a multi party payment system with an open-loop that hooks up various financial institutions and banks with the consumers. They also deal with critical information transfer and data management. The company also presents a wide range of renowned payment products employed by financial users to present credit, debit, prepaid, and instant cash withdrawal to their clients. Apart from VisaNet, the company also bestows its other marvelous services such as Visa Processing Services and Visa Debit Processing Services. These services ensure an efficient and protected payment network with a corporate policy followed by its client base. This not just ensures fraud protection, but also helps in brand promotion and maintenance.

With the coming up of even more user-friendly payment processing services and features such as instant money transfers, mobile payments, and eCommerce, not just the patrons and merchant account holders have benefitted, it has also helped the consumers to carry out convenient transactions, ensuring high profits to the financial institutes, evidently!  What has kept Visa Inc the sole trusted name across the globe is their invincible competence and aptitude in up keeping the secure networks and payment procedures as well as maintaining the cardholder data security.

 

Visa (V) Stock Strategy 2012 and Price Targets

This stock is an excellent buy below $85, but that level is way below its current price. As the stock is making new highs, it may not come down to those levels in a hurry. So, it’s a buy on dips and dollar cost averaging should be the best strategy to invest in Visa. One may invest 20 percent capital or more at current market price as the risk of missing out the rally is higher than the risk of falling prices.

Long term investors are likely to see much better returns than those willing to invest for 2012. They also have a dividend yield of about 0.90.

12 Month Price Targets

Aggressive: $140

Conservative: $90

Neutral: $115

Key Data Highlights

Visa’s Latest Financials