The new year has been great for a lot of stocks thus far. Valuations continue to run higher, and people are beginning to wonder, how high can they go? As price valuations become more and more extended, it is important to invest in stocks that can deliver growth and are not yet overvalued. A favorite of ours, Visa (NYSE:V), fits this mold completely. Visa has run up 15% thus far in 2017, from $78 to $90, but it still undervalued and has room to run.
Open Up Your Wallet
Go ahead, reach into you pocket or purse right now. Pull out your wallet, and open it up. I’d be willing to bet about half of you have at least one Visa payment card in your wallet. Visa dominates the global market for electronic payment. It accounts for half of all credit transactions and an even higher percentage of debit card transactions. Considering that electronic spending is still growing rapidly year over year, Visa dominating this market should mean it continues to benefit from the global switch from cash to card.
Visa’s business model allows it to generate revenue from fees it charges the card issuers and merchants who use its network. The fees are primarily based on transaction volumes. This business model is great because Visa has no responsibility for evaluating the customers credit scores and collecting payments. Visa is virtually just the middleman and it is up to the financial institutions, which issue Visa cards, to do the majority of the work.