Visa (V 0.94%) is a dominant force in the world of payments, having a leading position in card transactions. Shares have been a huge winner, as they've produced a total return of 2,550% since the company's initial public offering in 2008 (as of Nov. 15). A $38,000 investment made back then would be worth $1 million today.
The past trend is remarkable, but investors are focused on what the future holds. Can this financial stock make you a millionaire?
Image source: Visa.
Visa is an exceptional business thanks to a powerful network effect
Investors should identify businesses that possess an economic moat, as this is a clear indicator of a high-quality company. Visa falls into this category, thanks to a network effect. A whopping 4.8 billion Visa cards are in use across the globe, and they're accepted at over 150 million merchant locations. As the platform expands, it immediately becomes more valuable to these stakeholders. Cardholders have more places to shop, and merchants can access a larger customer base.
The presence of a powerful network effect means that Visa's competitive position is extremely difficult to disrupt. The system has worked well for merchants, consumers, and banks, and Visa has become an integral part of how the economy functions and how money moves between various parties. This setup means that it would probably require a challenger to be 10 times better to find adoption, which is obviously no easy task.
The topic of stablecoins immediately comes to mind as a potential risk factor. While this niche in the cryptocurrency space, particularly those backed by U.S. dollars, currently carry a market value of roughly $300 billion, they face an uphill battle. It will be hard to convince consumers to ditch their valuable rewards credit cards and move to stablecoins, even if merchants find value in cheaper transactions and faster settlement times.
Growth and profits should draw investor attention
In the face of this potential threat, Visa continues to hum along. Revenue in fiscal 2025 (ended Sept. 30) increased 11% year over year, totaling $40 billion. This was driven by an 8% gain in payments volume, which totaled a whopping $16.7 trillion. Transaction counts jumped by 10%, and cross-border volume was up 13%.
Visa benefits from the ongoing growth of the overall economy, and particularly expansion in spending activity. While this exposes the business to cyclical forces in the short term, over the long term, it has been a major tailwind. Plus, the rising adoption of digital payment methods also boosts Visa's financial performance.
The company's incredible profitability can't be overlooked. In fiscal 2025, Visa reported an unbelievable net profit margin of 50%. It rakes in billions of dollars in free cash flow each quarter, which is used to buy back shares and pay a dividend.
NYSE: V
Key Data Points
Is Visa stock a smart buying opportunity?
After taking a closer look at Visa, most people will come away impressed. This is a high-quality business with many favorable traits. Consequently, this company should be on the watch list, with investors ready to buy when a worthwhile opportunity presents itself. Unfortunately, this isn't the case today.
The stock is not cheap. It trades at a price-to-earnings ratio of 32.7. Starting at a high valuation gets in the way of forward returns.
For investors to become millionaires from owning shares, Visa must also be able to grow its earnings at a rapid clip over a very long period. In the past decade, the company's net income has climbed at a compound annual rate of 12%. Given the ongoing penetration of electronic payments, Visa should be able to post double-digit profit gains for the foreseeable future.
However, this isn't enough for the stock to be a millionaire-maker. Investors looking to score monster returns should temper expectations.
