Headquartered in San Francisco, CALIFORNIA, Visa Inc (V) reports a market capitalization of $467 billion and sells shares at $206.9 in the New York Stock Exchange:
Visa Inc. operates as a payments technology company worldwide. The company facilitates commerce by transferring value and information among consumers, merchants, financial institutions, businesses, strategic partners, and government entities.
Massive EBITDA Margin
Visa Inc does not report an enormous amount of sales, which is not good. With that, investors will appreciate V’s gross profit ratio of 79%. V does not report substantial EBITDA growth. Nevertheless, the company’s EBITDA ratio is positive and equal to 68%. General and administrative expenses decreased a -10%, which reduces the company’s EBITDA.
Money managers will most likely appreciate that the shares outstanding decreased a -3%. To sum up, the intrinsic valuation of each share increased.
With an asset/liability ratio of more than 1x, V’s balance sheet looks stable. In Q1, the total amount of assets was equal to $80426 million, with total liabilities of $42747 million. Moreover, Visa Inc has positive working capital, which shareholders will like. It means that the company can cover its short-term liabilities when they come due.
In my opinion, Visa Inc reports a significant amount of goodwill. It is equal to $16121 million. It is challenging to know the real value of intangibles and goodwill. In summary, there is a potential goodwill impairment risk. The company could review and impair intangible assets, which could lead to a decline in the share price.
V’s debt to equity ratio is below 2x, which I appreciate. Notice that Visa Inc reports cash and cash equivalents of $2147 million and net debt of $2147 million.
In Q1, V reported quarterly sales of $5687 million, and gross profit of $2147 million. The gross profit ratio was equal to 79x. Besides, V is profitable, which is favorable. Visa Inc released a positive quarterly EBITDA of $4042 million. With this in mind, either you buy shares or not, V is a company to be followed carefully.
V also showed a positive net income of $3126.0 million. Considering the quality of the business, I see room for V to grow into its valuation over time.
V trades at 117x EBITDA, which may not seem cheap. Nevertheless, with the company’s EBITDA margin of 68%, the EV/EBITDA ratio makes sense.
Disclosure: We Don’t Hold Shares of Visa
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