Chances are, that in your wallet, you have a credit or debit card that sports the Visa (V 0.73%) name and logo on it. That's how ubiquitous this leading payments processing business has become. It has a presence in more than 200 countries and territories, facilitating the smooth functioning of our economy.
Visa shares have crushed the market since their initial public offering in 2008. However, the financial stock hasn't outperformed the S&P 500 in the past five years. As of July 8, Visa shares are up 83% since the same date in 2020.
The future could prove to be better or worse. Where will Visa be in five years?
Image source: Visa.
Benefiting from a powerful secular trend
One clear reason that Visa is a great business is because it has registered steady growth over the years. Between Q2 2015 and Q2 2025 (ended March 31), the company's net revenue increased at an annualized pace of 10.9%. It's not unreasonable to expect this type of growth to continue indefinitely.
Visa benefits from the rising adoption of cashless transactions across the globe. The business doesn't make money when cash or checks are used as a form of payment. However, when people pay for things with credit or debit cards, Visa collects a tiny fee. This amounts to massive revenue, to the tune of $9.6 billion in the latest fiscal quarter.
Visa processed a jaw-dropping $3.9 trillion in payment volume in Q1. This figure was substantially greater than that of its industry peer, Mastercard.
Don't worry about disruption
Thanks to technology, it seems the economy is constantly changing. This creates a difficult environment for businesses to not only operate in, but to develop staying power.
The forces of disruption are always something to worry about, but with Visa, investors should keep calm.
This company benefits from a network effect. It has 4.8 billion active cards in use, accepted at more than 150 million merchant locations. The more cards there are, the more value merchants find in Visa, because there's a huge pool of customers. And since Visa is widely accepted, people are incentivized to have one of these cards in their wallet.
Unless a new payment platform came about that was 10 times better than the current system, I see minimal threat of Visa being disrupted. For consumers, merchants, and banks, Visa just works. This introduces trust among all these stakeholders.
Five years from now, Visa will still be thriving and dominating the global payments landscape. This is despite the rise of fintech platforms and stablecoins.
Can Visa beat the market?
Between now and 2030, I'm confident that shares of Visa will be higher than they are today. That belief stems from the company's impressive bottom-line trajectory.
In the past five years, adjusted earnings per share (EPS) have climbed at a compound annual rate of 14.7%. Wall Street consensus analyst estimates call for adjusted EPS to grow at a yearly clip of 12.6% from fiscal 2024 to fiscal 2027. I believe a double-digit gain is reasonable throughout the rest of this decade and beyond.
Any investor should be pleased if a business can increase its earnings power going forward. However, this favorable trend doesn't mean the stock in question will beat the market. It's critical to assess the market's expectations. In Visa's case, the current price-to-earnings ratio of 35.6 is near a three-year high, which is not a compelling entry point.
This stock has been a huge market outperformer since 2008. But looking over the next five years, I expect a similar story as the last five: Visa probably won't do better than the S&P 500.
