Visa reported numbers after market two nights back. These are for their fourth quarter and the year end. First, as always, a little perspective on what they (Visa) do. Last year, 2015, they processed 71 billion transactions on 2.4 billion cards. That means that roughly every third person on the planet has one Visa embossed card. 7.4 trillion Dollars worth of merchandise was bought on Visa cards last year. Whoa! Forget the fact that cash will become increasingly irrelevant, so will the physical cards themselves. You will increasingly use nifty technological options to pay for goodies. And there will be and are many growth opportunities globally, for instance in the prior year annual report, this line caught my eye:
"Cash and checks in Europe represent 37% of personal consumption expenditure, a 3.3 trillion dollar growth opportunity."
I am guessing that governments want people to use less cash too.
The more people use electronic payments and are encouraged to do so, the more receipts governments are likely to accumulate. Europe still strangely relies heavily on cash, and in the US there are these quirky things called checks. We actually have, in urban areas in South Africa, very sophisticated payments systems. No Apple Pay yet but geo payments and tap & go cards are ahead of most countries.
On to the numbers, GAAP Full year net income clocked 6 billion Dollars, or 2.48 Dollars per share (2.84 Dollars ex special items) on revenues of 15.1 billion Dollars for the full year. As you can see, Visa is a very profitable business, each little (of the billions) of swipes add up to a big, big number. And of course, as you know, the company hiked the dividend the other day to 16.5 cents a quarter, from the current 14 cents. It may not sound like a lot, a double digit increase in the dividend is a pretty special thing.
Added of course to the huge buyback program, in fact, as per the last annual report (which does not include the year just passed) the company has bought back 735 million shares. As per (courtesy SeekingAlpha) the
earnings transcript, Visa bought back 92 million share last year. There are around 1.87 billion shares in issue currently,
roughly 30 percent of the shares in issue have been bought back in eight and a half years since listing. Stick around for another decade and a half and you may be the last shareholder left (wink). Not likely!
The company guided as follows for the next full year, revenue growth of 16-18 percent (lower than expectations of 19 percent), non-Gaap EPS is set to increase in the mid teens next year. Is that acceptable for a business that now trades on an earnings multiple, historical of 33 times? According to the analyst community, their expectations are for EPS growth of the same as revenue growth prospects, which means that at 82.03 Dollars closing price the stock trades on a 25 times forward multiple.
I do think that is acceptable for a company that has lengthy runway ahead, this company continues to benefit in the move away from cash and checks, away from the physical to the electronic.
Visa represents one of the very best investment opportunities currently. I suspect that whilst there may not be the hugest amount of heavy lifting in the next financial year, a return of above ten percent is more than acceptable in this environment. The company continues to stay at the forefront of technology, with regards to the future of payments, utilising one of the biggest payment networks known to mankind. We continue to accumulate the stock at current levels and this company is a huge keeper. Tuck it away, stay overweight.