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22catch22 (57.56) Submitted: 4/06/08 3:52 PM : Start Price: $65.01 V Score: -15.82
Go to www.secinfo.com and look at Visa's 10k to see where I got the following numbers from:Valuation:On page 111 of their 10k they reported Net Income for the following years as...2005 = $360,445,0002006 = $454,561,0002007 = $(1,076,095,000) NET LOSSHowever, the 2007 loss was due to hefty litigation charges brought on by the American Express 2.5 Billion dollar lawsuit. Note that there is some evidence that suggest Visa is not done with their litigation charges and part of this IPO was to set money aside for future litigation needs. For now lets just take the litigation charges out of the equation so we can value the stock based on a best case scenario. To do this I took the litigation costs out of the 2007 Consolidated Statement of Operations... This gives us the following:Operating Income = $1,203,335,000Working it further on down to Net Income, ASSUMING a 35% Income Tax (2005 had 40.18%, 2006 had 34.82%), we get..Net Income = $817,847,800So for this valuation we will use the following Net Incomes:2005 = $360,445,0002006 = $454,561,0002007 = $817,847,800 (Adjusted to take out litigation)Divide Net Income in 2007 by 446,000,000 IPO Shares Outstanding and you get 1.834 EPS. Use the MasterCard P/E of 25 and your Visa per share value should be $45.85. * This is determined by multiplying the MA P/E of 25 by the adjusted EPS of 1.834. At the current price of 64.48 the Visa P/E should be approximately 35.16. That is 40% higher than Master Card. THIS IS ALL WITHOUT FACTORING IN THE LITIGATION LOSSES!!!Visa should, by all means, come back to a lower value much closer to it's IPO price. The good news:Without litigation Visa had a Net Income increase from 05-06 of 26%. Their increase from 06-07 was 79.92%So there should be a little extra on top of the stock price to look at future earnings, assuming they aren't already built in based on Master Cards P/E.
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JTnSS0924 (< 20) Submitted: 4/11/08 1:40 PM
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Awesome workup. I still think it'll stay in the 60's for a while due to the hype but eventually it'll come back to earth.
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BlueChipKittie (< 20) Submitted: 4/28/08 1:06 AM
I have a Visa Check Card. I love it! No carrying cash. I can convert from Debit to Credit. Alot of people are using these types of cards. This product along with The 'PRE PAID" cards that are out there are going to push Revenues up for alot of Companies. V will perform nicely for years to come.
Ozcutty (41.50) Submitted: 4/28/08 9:42 PM
I agree, way overpriced at something like 40x earnings.It was fully priced at its IPO. Seems to be being bought by people that haven't got a clue about valuation and think it will quadruple like MA. What they don't realise is that MA debued at about 14x earnings, and was underpriced. V learned from MA's mistake and priced their shares fully.Just because it is a great company doesn't protect you from overpaying and losing money.
knigtstemplar (61.89) Submitted: 5/29/08 4:45 PM
I guess V staying in the 60's would be nice if you were bearish on it. It has hovered in the 80's for a few weeks now. Even at 60 it would have been a good investment.
nextvillage (98.26) Submitted: 7/01/08 6:24 PM
Yes, they have to pay an aggregate amount of 2.25 billion to American Express. with an initial payment of 1.13B which was due in March. The remaining payments are payable in installments up to 70 million per quarter (over the next 4 years).
LearninToInvest (< 20) Submitted: 10/01/08 7:38 AM
A post with some actual calculations instead of general unfounded opinions, nice work!
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