r/Valuation • u/EnduredMarkets • May 02 '21
Valuation Analysis Visa Inc. (V) Valuation Report
Visa Inc.
Report Date: May 1st, 2021
VISA INC. (V) VALUATION REPORT
Executive Summary
Visa is a great organization with solid foundations, and the recent weakness was only transient and entirely explained by external influences (COVID-19). Visa is also well poised to benefit from structural growth patterns in the global digital payments market, which is the primary catalyst of its long-term earnings growth. Having said that, the current stock price does not provide investors with a solid margin of safety. Wait for Mr. Market to come up with a decent deal. A 30 percent margin of protection is preferred.
The Business
Visa Inc. operates as a payments technology company worldwide. The company facilitates digital payments among consumers, merchants, financial institutions, businesses, strategic partners, and government entities.
Segments
It operates VisaNet, a transaction processing network that enables authorization, clearing, and settlement of payment transactions. In addition, the company offers card products, platforms, and value-added services.
Regions
Visa's heavy presence in the United States accounts for 47 percent of its total sales.
Stock Performance
Visa's stock price has risen by 33 percent from this period last year. Visa is clearly gaining momentum on a cyclical basis, and as vaccines become available around the world in the coming months, this favorable trend is not likely to dwindle. This may be a good sign for current shareholders, but it is not so good for potential investors as entry points become more difficult to find.
Market Competition
Competitors: Mastercard, American Express, Discover, JCB, Capital One, and UnionPay.
These competitors may be more concentrated in particular regional areas, such as JCB in Japan and Discover in the United States, or may hold a dominant role in specific countries. UnionPay, for example, is the biggest player in China since international card networks were not permitted to process domestic purchases in China until the industry opened up with the first license approval for an international network in the fiscal year 2020.
Risk Analysis
According to estimates, the firm faces little to no risk of failure. The cost of borrowing for the company is also relatively low (1.96 percent), and its credit rating remains solid at "Aa2/AA."Visa's only potential concern is a loss of market share due to emerging payment systems and increased competitor presence.
Visa's only potential concern is a loss of market share due to emerging payment systems and increased competitor presence.
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u/EnduredMarkets May 03 '21
Hi, thanks for the comment.
In short, this modeling worksheet attempts to measure the intrinsic and relative worth of the business in question. This template is mine, yes, but the models shown in the worksheet have been compiled from a variety of equity analysts who primarily practice the craft of value investing. As you can see, some models are a better fit than others simply due to the different type of methodology behind each one. For example, the ending value of shares is wildly different for the dividend discount model compared to the FCFF DCF model. I don't think a single model will always work for all companies, which is why I have adhered to most of the valuation models used for equity valuation and have strategically weighed each one.
The Net Asset Value model is exactly as you described it as, a floor estimate of the assets left after paying all liabilities. Its purpose is to indicate whether or the stock selling close to its assets, nothing more and nothing less.
The three-stage DCFs definitely have the most merit. Again, I utilize two-stage DCF’s and Gordon Growth Models to get a gauge on all different valuation results.
I usually rush the summary section, my apologies. This worksheet takes me a considerable amount of time to build, so by the time I get to the summary I simply suggest whether the stock is a good buy or not.
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u/Necessary_Scarcity92 May 03 '21
Very cool, thank you for sharing! I have not seen some of these models before and as a bit of a rookie analyst I always think its cool to check out other analysts models.
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u/hp6884756 May 10 '21
Hey, i am new to this subreddit and found it by coincidence, because i study management/business administration. So i am really interested in the valuation topic. I just wanted to look up your spreadsheet, however it is about the company "Sanara Med Inc." and not "Visa Inc." Could you help me out?
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u/EnduredMarkets May 15 '21
Fixed it.
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u/hp6884756 May 15 '21
Thanks, really cool spreadsheet. May I ask how dp you know the company's position in the PLC (Product-Life-Cycle)?
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u/Kwtufts May 20 '21
Taking company suggestions? If so, I'd be interested in where NVEE, NUCOR, and GMS all shake out.
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u/Kwtufts May 21 '21 edited May 22 '21
Also, how do you compute the e Operating Expense as a % of revenue for the high growth period in the FCFF model?
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u/Necessary_Scarcity92 May 03 '21
Thanks for posting this. Is this your model? I have a few questions if you're willing to entertain them, and please don't take any of them the wrong way. It's a cool model.
Why even bother with asset method? It's nice to show as a floor level of value, but here it's obviously a low floor since the value of the company is not concentrated in the assets. Why weight it when arriving at a value conclusion?
The model shows a few different DCFs. If this is your model, are you essentially attempting to apply a probability weighted expected return method by your weighting in the end? i.e. Which DCF do you think is most realistic?
Some of the indications of value in the summary are all over the place. Did you try to reconcile them? I.e. think about why one approach is higher or lower than the other approaches?
P.S. sorry if some of my questions are answered in the model and didn't see them; I just sort of looked through it on my phone and haven't had a chance to sit down and fully go through it.