This might be an opportune time to buy Visa(NYSE: V) stock. The credit card giant is an all-weather stock because it does well when the economy does, which is most of the time. The market continues to hit new highs since the election, and that bodes well for Visa and its shareholders.
Can Visa keep it up? Let's consider where investors can expect it to be in three years.
The king of credit cards
Visa operates the largest credit card network in the world. It powers 4.5 billion cards worldwide and works with 14,500 financial institution partners. Over its last four reported quarters, it processed close to $16 trillion in payment volume.
It has created the premier payment network and is an integral player in the world economy. There aren't many such networks -- the biggest ones are owned by Visa, Mastercard, and American Express. There's also Discover, which is a smaller company that is in the process of being acquired by Capital One Financial. That might be enough competition to keep fees in check, but with so few options, each one enjoys an incredible amount of business.
Despite changes in inflation rates and pressure in the economy over the past few years, Visa has performed impressively. People still need to make purchases, and they frequently rely on Visa-branded cards when they do. In its fiscal 2024 fourth quarter, which ended Sept. 30, revenue increased 12% year over year, and it rose 10% for the full fiscal year.
Although moving money from place to place on its network is Visa's core business, it's developing a broader business with more services and small business solutions. For example, it has a fairly new digital payments segment called Visa Direct under its "new flows" category. Visa Direct provides instant electronic payments globally. The volume of Visa Direct transactions increased by 38% year over year in the fiscal fourth quarter to $2.8 billion, and revenue from the new flows category overall increased by 22%.
Its other major non-core category is value-added services, where revenue also increased by 22% year over year in the fourth quarter. Visa offers a large collection of small business solutions that go beyond simple card swipes. These kinds of innovations supercharge the core business and expand the company's total opportunity.
In three years, no matter what's happening in the economy, Visa should have more credit card holders and be working with more financial institutions. It's also likely to have higher revenue. If the economy does improve over that period, its performance will be that much better.
Unmatched profit margins
At Visa's scale, it can reliably deliver increasing profits. It has a capital-light business that makes money every time someone uses a card, and it can expand its footprint in the payments space without commensurate expenditures. It has incredible profit margins that just keep getting better.
V Profit Margin (Quarterly) data by YCharts.
Earnings per share (EPS) increased 17% year over year in the fourth quarter and for the full year. Visa's model lends itself to profitability, and its continued efforts to sustain its dominant position and grow its business in new directions should keep it demonstrating healthy profitability over the next three years and beyond.
Market-beating performance
Visa stock has outperformed the market over the past three years, despite challenging macroeconomic conditions.
This is a snapshot in time, and as you look back over longer periods, Visa's lead over the broader market becomes wider. Expect Visa to keep beating the market and potentially gain even more under better conditions.
Should you invest $1,000 in Visa right now?
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American Express is an advertising partner of Motley Fool Money. Discover Financial Services is an advertising partner of Motley Fool Money. Jennifer Saibil has positions in American Express. The Motley Fool has positions in and recommends Mastercard and Visa. The Motley Fool recommends Discover Financial Services and recommends the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.
