Visa Inc. (V) operates as a payments technology company worldwide. The company facilitates digital payments among consumers, merchants, financial institutions, businesses, strategic partners, and government entities. This week, I fundamentally analyze Visa’s stock. I review Visa’s operating segments, look at its key ratios, derive the intrinsic value using Discounted Cash Flow (DCF) analysis, and calculate the expected rate of return from this investment. Since this is a long video, please feel free to use the time stamps in the video if you only wish to watch certain topics.
I review various key ratios such as Revenue, Net Income, Shares outstanding, Dividends, Payout Ratio, Free Cash Flows (FCF), Financial Leverage, Current Ratio, Debt to Equity Ratio, Return on Equity (ROE), Days Sales Outstanding (DSO), Days Inventory, Payable Period, Cash Conversion Cycle, Inventory Turnover, etc.
After taking into account 2020’s free cash flow of $9,704 million figure, a 10% growth rate of FCF (growth for the next 10 years), 10% discount rate, 5% long term growth rate (growth from 10 year mark to perpetuity), 2,213 million shares outstanding, and $21,071 million of long term debt, the DCF analysis yields us an intrinsic value of $126 per share. If we drop the discount rate from 10% to 8%, the intrinsic value comes to $226 per share. Using the current stock price of about $230 per share, and taking into the shares outstanding and future projects of free cash flows, we get the annual expected rate of return to be 1.4% if we hold this security through 2075.
0:37 Business Overview
3:01 Key Ratios Analysis
12:24 Discounted Cash Flow Analysis / Intrinsic Value
14:30 Expected Rate of Return Calculation
15:32 Summary / ConclusionIf you found my video above helpful and interesting, please do like, share, and subscribe to the YouTube channel.
MasterCard’s Website: here
Morningstar Key Ratios Link: here.
Useful Resources here.
Visa Inc. is an American multinational financial services corporation headquartered in Foster City, California, United States. It facilitates electronic funds transfers throughout the world, most commonly through Visa-branded credit cards, debit cards and prepaid cards.
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