Visa (V) is trading at price-to-earnings multiples between two and three times those of its peers. Moreover, even if rosy analyst estimates are correct and Visa's earnings growth pulls ahead of its peers, such growth would have to be sustained for too many years to validate its high price-to-earnings multiple. The high price multiples of Visa should dissuade investors from buying until its valuation metrics descend closer to those of its industry.
Computing Future Valuations from Growth Projections
Investors should buy stocks trading at prices which make them good deals. A poor company trading at a dismal price may be an excellent trade. Visa shares are trading at the other extreme: it is a good company trading at fantastically enthusiastic valuations which should be avoided. Its metrics are provided with other business services companies:
|
Ticker |
Company |
P/E |
Earnings Growth Est. |
P/S |
Sales Growth Est. |
|
V |
Visa |
76.9 |
19.5% |
11.2 |
23.8% |
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