It's hard to believe, but nearly a year after the economic lockdown used to slow the spread of COVID-19, the S&P 500 is sitting atop a 19% trailing one-year advance. Yet the novel coronavirus continues to spread, and the global economic recovery is still fragile. In fact, many investors fear the market is due for a crash. 

It's important to remember the stock market averages one correction (a drop of at least 10%) every year, and I don't think 2021 will be any different. If and when such a so-called crash occurs, though, I'm happy Visa (V 0.26%) is a core holding in my portfolio.

A man sitting at a computer workstation looking at charts of the stock market.

Image source: Getty Images.

On the road to recovery

Much like its peer in the digital payment network space Mastercard (MA -0.26%) (which is also one of my core holdings), Visa took a hit last year when the global economy came to a screeching halt. In fact, while the stock market overall has rebounded (and then some) in the last 12 months, Visa's stock price is still unchanged from where it was a year ago. And for good reason -- weakness in travel and in-person, card-present spending has put a cap on the company's revenue rally. 

Period (Corresponding to Calendar Year 2020)

YOY Cross Border Volume Increase (Decrease)

YOY Payments Volume Increase (Decrease)

YOY Revenue Increase (Decrease)

Q2 2020




Q3 2020




Q4 2020




Q1 2021




Data source: Visa. YOY = year-over-year. 

Still, given the new lockdowns that were enforced in the final months of 2020 in some areas like Europe and North America (corresponding to Visa's fiscal 2021 first quarter), the company is managing just fine. Cross-border transaction volume remains down a hefty amount compared to pre-pandemic levels, but overall payments volume is back in growth mode. Booming e-commerce in particular is a bright spot here, and making up for card-present payments weakness in a big way. Visa isn't getting the same lift as PayPal (PYPL -0.88%) in this department, but the leader in digital money movement is nonetheless well on its way to recapturing year-over-year growth once again. 

A value stock in the fintech space

Besides a bet on the continual increase in digital payments activity across the globe, Visa is also a top name in the fintech space. Due to regulatory scrutiny, it did terminate a $5.3 billion acquisition of Plaid it announced a year ago, but it did acquire Latin American fintech start-up YellowPepper last quarter. And with $18.0 billion in cash and investments on the books (offset by $21.1 billion in long-term debt), Visa will be able to continue investing in its payments and digital data technology ecosystem. 

However, Visa does trade for 48 times trailing 12-month free cash flow as of this writing. For a company the size of Visa (with a current market capitalization of $435 billion), that's hardly a value by most investors' definition. But consider: This valuation includes a sharp 21% drop in Visa's free cash flow over the last year. As the company's revenue rebounds in the year ahead as it starts to lap the initial effects of the pandemic, the bottom line is due for a big rebound too. 

Also consider Visa's free cash flow profit margin over the last 12 months. Even in a difficult period, the company posted a free cash flow profit margin of nearly 44% -- talk about an enviable business model. Bear in mind this is cash generated over and above investments in property, equipment, and other capitalized purchases, so it's money Visa can use to pay its dividend (currently yielding 0.6%), repurchase stock (a new plan brings the company's total authorization to repurchase up to $11 billion), and make acquisitions.

Put another way, Visa looks like a great long-term value, one I'll be happy to own (and buy more of) during a market "crash."