$V · Everything Money · 2026-11-07

Visa , the global payments network, did the same.

So, let's put this idea to the test on one of these record-breaking companies, Visa. Visa operates the enormous network that allows you to swipe or tap your card almost anywhere on Earth.

It's a great company. It does not lend money like banks. Instead, it quietly takes a small slice of the trillions of dollars in payments.

Last year, its revenue grew by 15% to approximately $46 billion, and it retained more than $23 billion of that as net profit. Guys, this is an incredibly profitable machine.

So, what is there that we don't like about it ? the price. I want to remind everyone that a great story or a great company at the wrong price becomes a bad investment.

So, instead of looking at the share price, this is the actual price of the company, i.e., the market value. $915 billion. Now, the next thing I always do is go directly to the value of the facility.

The reason is that the value of the business is usually greater than the market value, and this difference of about $45 billion is essentially their debt.

This seems like a large sum of money , but you should compare it to something. I'm comparing it to their free cash flow. When you generate $21 billion in free cash flow annually against $45 billion in debt, I'm not worried about that debt at all.

The next thing is a measure of quality: return on invested capital. 28.5 percent annually over the past five years, and nearly 36 percent last year. Therefore, the growing return on capital means that this company is of high quality . Therefore, it deserves a price premium.

What is the size of this bonus? Well, it is currently selling at a price equivalent to 43.5 times last year's free cash flow, and 50 times the average of the past five years. That seems like too much.

But again, if you know the fact that Visa will grow its profits by 100% annually over the next ten years, then this price is very cheap. However, it is very difficult to achieve that .

But my whole point is to show you that this metric in itself does not mean that it is expensive or cheap. It's simply a way to think about the future.

Guys, we've talked about this. Look at this profit margin . The profit margin for 10 years is 49.7%, for 5 years 51.3%, and for one year 51.2 %. More than half of the money it generates is after-tax profits. This is the amazing part.

Their goal as a company is to continue to get a share of every small transaction. Guys, they're paying out a 0.464% dividend next year. That will consume about $5 billion of their free cash flow.

So, this is part of their free cash flow , and it's not a big deal.

Let's take a look at their eight pillars. Guys, like many great companies out there, they got a lot of checkmarks: high returns on capital, share buybacks, hopefully not expensive stock, high cash flows, high net income, increasing revenues, and low debt.

It's just about these annoying rating scales. The five-year price-to-earnings ratio and the five- year price-to-free cash flow ratio are important, but we will soon be able to see if they are actually not as bad as we think .

Now, let's move on to the analysts' estimates . Well, the analysts aren't entirely optimistic , I mean, maybe they are. $15 per share as dividends rising to $19 over the next three years.

This is actually very powerful . These are two-digit numbers. Revenues are also growing at low double-digit figures, from 50.82 to 66 billion.

Guys, wherever the global economy goes, they're likely to continue performing a little better than that. The reason for this is how many people in the world don't even own a Visa card?

Every time Visa gets a new person to use its card, it means more and more money in their pockets. This is a great thing in the long run.

Now, we have some stories, and we have some numbers. Our goal now is to review the stock analyst, make assumptions about the future , and then determine the company's value today.

So guys, I'm doing a 10-year analysis. Do you remember when I told you about returns on capital? It's better. 10, 5, and one year, she continues to improve.

My first question is, what revenue growth do I assume for the next ten years? Guys, I know that analysts for the next three years were assuming 10 or 11%, but I have to assume that at that time there may be some kind of global recession or some reason preventing it from continuing to grow in this way .

I didn't drop too low. I chose 6.5, 9, and 11.5.

Next, profit margin and free cash flow. Free cash flow tends to be lower, as you can see, so I'm focusing on free cash flow here, and I'm putting 46, 48, and 50% on both free cash flow and profit margin.

Next, what is the price-to- earnings ratio or price-to-free-cash-flow ratio that Visa should have 10 years from now? Remember, high-quality work, very difficult to surpass, great margins, excellent balance sheet, all the hallmarks of a high-quality company.

So, it really does deserve a premium that's above the historical S&P 15 to 17 average.

Guys, I've entered ratios of 21, 24, and 27. That's a big number, one of the highest numbers I've ever used , but the point is, it's a Visa company. If I gave you a trillion dollars today and told you to compete with Visa, I think you would have a very difficult time doing so . This is a type of indicator of quality.

Finally, the rate of return on intrinsic value is 9.5 percent without a safety margin. What this means is that I am simply trying to determine the value of this company based on a historical return of 9 or 10 percent.

I'm not here to sit and tell you that this is the price you have to pay. The returns required vary from person to person. What I would say is, if you're going to buy individual stocks, get a higher return than the market, otherwise you're better off buying a low- cost exchange-traded fund (ETF).

So, I pressed the analyze button. The stock price is currently 433. I have a low price at 240, a high price at 460, and an average price at 330. So, what all this means is that if all my average assumptions are met and I pay today's price, I will achieve a return of 6.18 percent.

Now, folks, these returns below include dividends. Therefore, do not add dividends on top of it.

For me , it might be a little expensive because even my best assumptions give a return of about 10.25 percent. I really don't want to invest in something where the best assumptions only give me an acceptable return.