Visa, Inc. (V)

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 = $360,445,000


2006 = $454,561,000


2007 = $(1,076,095,000) NET LOSS





However, 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 = $1,203,335,000





Working it further on down to Net Income, ASSUMING a 35% Income Tax (2005 had 40.18%, 2006 had 34.82%), we get..


Net Income = $817,847,800





So for this valuation we will use the following Net Incomes:


2005 = $360,445,000


2006 = $454,561,000


2007 = $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.