The holiday season has brought about a fresh bout of consumer spending, resulting from a resurgence in consumer confidence as inflation decreased over the course of the last year. This poses a promising start for 2024, while heightened spending enhances prospects for the consumer financial services sector.
The financial sector’s juggernaut Visa Inc. (V) topped estimates in the fourth quarter as consumers waved off fears of an economic slump and resumed travel after the global pandemic. Its fourth-quarter adjusted EPS came in at $2.33 versus the estimate of $2.24.
Therefore, given this favorable outlook for 2024, let’s look at the trends of V’s key financial metrics to understand why the stock could be a solid buy now.
Analysis of Visa Inc.'s Fluctuating Financial Trends and Growth from 2021 to 2023
The trend in trailing-12-month net income for V has been generally increasing. Here are some significant points:
- At the beginning of our series on March 31, 2021, the net income sits at $10.66 billion.
- There is a slow but steady rise over the next year, with V reporting a net income of $13.77 billion by March 31, 2022.
- Net income continues to increase with larger gains. By June 30, 2022, it had jumped to $14.60 billion, and by September 30, 2022, it had reached $14.96 billion.
- By the end of 2022, V reported a fairly stable yet slightly increased net income of $15.18 billion on December 31.
- The rate of increase noticeably picks up in 2023. By March 31, 2023, the net income reached $15.79 billion, followed by a considerable leap to $16.53 billion by June 30, 2023.
- The series concludes with another sharp uptick, delivering a net income of $17.27 billion on September 30, 2023.
If we compare the first value in the series (March 31, 2021 - $10.66 billion) to the last (September 30, 2023 - $17.27 billion), there has been a substantial overall growth in V's net income amounting to approximately 62%. This indicates a strong upward trend for V's financial performance, primarily emphasized in more recent quarters of the data series.
The historical data from V demonstrates a general upward trend in the reported trailing-12-month revenue, with noticeable fluctuations in specific periods.
Overview:
- On March 31, 2021, the revenue was at $21.35 billion.
- The most recent value from September 30, 2023, shows an increase to $32.65 billion.
Key observations:
- Notably, every quarter displays an increment in revenue, reflecting a consistent and positive trend.
- June 2022 witnessed a significant rise, reaching $28.08 billion from $26.94 billion, indicating a significant leap for that period.
- Another jump occurred in March 2023 when the figures surged to $30.98 billion from $30.19 billion in December 2022.
Growth Evaluation:
The company has displayed an impressive growth rate of about 53%, calculated from the first-value revenue of $21.35 billion and the last-value revenue of $32.65 billion. In conclusion, the business exemplifies strong financial performance with consistent growth and minimal volatility in its revenue.
The time-series data provided represents the Return on Invested Capital (ROIC) of V from March 2021 to September 2023. The following is a summary of the trend and fluctuations observed in the data:
- There is an overall growth in ROIC over the two-and-a-half-year period, with the ROIC increasing from 0.506 in March 2021 to 0.805 in September 2023.
- The increase represents a growth rate of approximately 59% (calculated by measuring the last value from the first value) over the course of the given period.
- A general upward trend in the ROIC can be observed over the years. However, there are some periods of decline: June 2022 sees a decrease from the previous quarter (0.716 to 0.677), and the value drops again in December 2022 (from 0.699 in the prior quarter to 0.686).
- The final quarter of each analyzed year (December) tends to have lower ROIC values than the rest of the quarters.
- The highest recorded value for ROIC during the reported period was 0.805 in September 2023.
This indicates that despite intermittent drops, V's ROIC has generally experienced substantial growth over the given timeline, with particular emphasis on recent data.
- March 2021: 0.506
- June 2021: 0.549
- September 2021: 0.605
- December 2021: 0.671
- March 2022: 0.716
- June 2022: 0.677
- September 2022: 0.699
- December 2022: 0.686
- March 2023: 0.698
- June 2023: 0.766
- September 2023: 0.805
This data suggests that Visa has been successful in efficiently using its capital to generate profits over the period studied.
The trend and fluctuations in the Return on Assets (ROA) of V can be summarized as follows:
- The series depicts a generally rising trend across the observed period from March 2021 through September 2023.
- In the first half of the series, ending June 2022, there are consistent but moderate improvements to the company's efficiency, with a growth rate from 0.134 in March 2021 to 0.176 in June 2022.
- The ROA data shows more fluctuation starting July 2022, with the value reaching 0.18 by the end of 2022.
- The biggest jump in ROA came in June 2023, when it rose to 0.191 from 0.184 in March 2023.
- Visa's ROA further increased to 0.196 by September 2023, marking the highest recorded value for the observed series, thereby indicating the firm’s improving profitability.
- To quantify the overall growth rate, calculating the last value (0.196) from the first value (0.134) is approximately 46%, indicating a substantial improvement in performance over the years.
In conclusion, V's demonstrated a steadily increasing trend in their ROA, showing continuous improvement in their ability to generate earnings from their assets. The most recent data suggests that this trend is expected to hold or possibly increase, given the consistent upward pattern in these metrics.
Analyzing Visa Inc.'s Climbing Share Price Trend from July to December 2023
The data indicates that the share price of V has generally shown a growth trend from July to December 2023, albeit with some fluctuations.
- On July 7, 2023, it was $237.69.
- By July 28, 2023, it had decreased slightly to $237.2.
- During August 2023, the value fluctuated, ending the month at $240.94.
- In September 2023, the share price peaked at $246.43 on September 8 before dropping to $231.09 by the end of the month. This represents a downward trend within the month.
- October 2023 saw an overall increase, from $231.69 on October 6 to $237.36 on October 20 before dropping slightly to $233.08 on October 27.
- In November, there was a sharp upward trend. Starting from $238.21 on the 3rd, it rose to $252.19 by November 24.
- This uptrend continued in December, reaching its peak at $260.40 on December 29.
Thus, the price of V showed an overall increase during this six-month period. There are some decelerations, most notably in late July and throughout September, but these are followed by periods of acceleration, particularly in late October through to December.
The final weeks of the year displayed the most significant and fast-paced growth. Here is a chart of V's price over the past 180 days.
Visa Ranks High in Quality, Stability, and Momentum: A POWR Ratings Analysis
The POWR Ratings grade of stock V in the Consumer Financial Services category has shown a predominantly stable performance through 2023. It predominantly maintained a B (Buy) grade. Here are some highlights of its ranking in its category over the months:
- July: It started with a commendable rank, being #4 out of the 47 stocks on July 8, 2023. However, it did see a slight drop in rank to #8 by July 22, 2023.
- August: The rank improved and reached as high as #3 on August 9, 2023, slightly dipping to #6 by the end of the month.
- September: This month saw a relatively stable performance, mostly maintaining a rank around #5 to #8 place.
- October: In October 2023, there was a slight drop in rank, where it fell to #10 at one point but managed to climb back to 9th by the end of the month.
- November: An improvement in trend can be seen, starting at rank #9 and improving to #7 place by the end of November 2023.
- December: It started maintaining a consistent rank at #6 for the initial weeks before slipping to #11 by the end of December 2023.
As per the latest available data, as of January 2, 2024, the POWR grade of V in the Consumer Financial Services category stands at B (Buy). However, its rank in the category has slipped down to #11. This means that out of the 47 stocks in this category, V ranks 11th based on the latest data available, implying there might be room for improvement.
Based on the given POWR Ratings data, V received its highest ratings in three crucial dimensions: Quality, Stability, and Momentum. The details for these ratings are discussed below:
Quality - Visa consistently received the top score in Quality throughout the entire course of study. This dimension remained at a very high 97 across July 2023 through December 2023, showcasing its excellent performance and stability in this metric.
Stability - Stability exhibited a clear upward trend over the specified period. In July 2023, it was rated at 87, and it gradually climbed to 91 by November 2023, maintaining this score in December 2023 as well. This trend underscores the increasing stability of Visa across this time frame.
Momentum - Meanwhile, Momentum showed a degree of volatility over the months. It started at 71 in July 2023 and fell to 55 by October 2023, only to skyrocket to 85 by December 2023, demonstrating an impressive year-end surge, which signals strong positive momentum going into the following year.
It's important to note these trends in POWR Ratings as they exemplify the factors that have contributed to Visa's market performance. This data shows that despite some fluctuations, Visa consistently performed exceptionally well in terms of Quality and significantly improved in Stability over the period while also ending the year with high Momentum.
How does Visa Inc. (V) Stack Up Against its Peers?
Other stocks in the Consumer Financial Services sector that may be worth considering are Regional Management Corp. (RM), Qifu Technology, Inc. (QFIN), and EZCORP, Inc. (EZPW) - they have an overall rating of A (Strong Buy) or B (Buy). Click here to explore more Consumer Financial Services Sector stocks.
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V shares were trading at $258.36 per share on Tuesday afternoon, down $1.99 (-0.76%). Year-to-date, V has declined -0.76%, versus a -0.69% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
Visa (V) 2024 Stock Forecast: What to Expect StockNews.com
