Morningstar | Visa Holds Steady in Fiscal 4Q
Visa’s impressive growth held basically steady in its fiscal fourth quarter, and the company finished the year roughly in line with our expectations. We continue to believe the company has a strong and long-lasting growth runway, given the ongoing global shift toward electronic payments and Visa’s dominant position in the global payment infrastructure. We will maintain our $129 fair value estimate and wide moat rating.Net operating revenue was up 12% year over year, driven by an 11% increase in payment volume, excluding currency effects. Management noted that strong volume in the United States was partially offset by some weakness in China, but in our view, the quarter highlights the company’s ability to deliver both strong and steady growth over time.
As we expected, client incentives increased from 20.8% in the third quarter to 21.7% this quarter. However, incentives for the year came in at 21.0%, better than expectations. Management attributed this to signing delays and expects incentives to increase to 22%-23% of revenue next year.
Excluding a one-time litigation charge, operating margins held flat year over year at 67%. Over time, though, we continue to think the scalable nature of the company’s operations will allow for modest but sustainable margin improvement.
During the year, Visa returned $9.1 billion to shareholders in dividends and stock repurchases, or about 3% of the current market capitalization. While we don’t think the repurchases this year were value creative given the trading level, we appreciate management’s diligence in this regard, and we think this highlights the significant financial flexibility Visa enjoys.
Visa is engaged in digital payments. The company facilitates payments between consumers and businesses. The company is focused on its proprietary network, VisaNet, to provide products and services. The company provides a portfolio of business payment solutions, including small business, corporate (travel) cards, purchasing cards, virtual cards/digital credentials, non-card cross-border business-to-business payment options and disbursement accounts, covering various main industry segments around the world. The company also provides several capabilities and services, including fraud prevention and security, processing, loyalty, merchant and digital solutions, consulting and data solutions.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.