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Here's Why You Should Add Visa (V) Stock to Your Portfolio

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Visa Inc. (V - Free Report) emerges a solid bet on the back of core strength and good growth prospects. The company also has an exciting earnings surprise history. In fact, Visa surpassed the Zacks Consensus Estimate in each of the last four quarters with an average positive earnings surprise of 8.4%.

The stock has been witnessing upward revisions over the last 90 days, indicating analysts’ optimism about its earnings growth potential. The Zacks Consensus Estimate for fiscal 2017 and  fiscal 2018 moved north by 1.8% and 1.5%, respectively.

Given the positive estimate revisions and a bullish Zacks Rank #2 (Buy), we expect a decent upside for the stock in the near term.

Visa’s share price performance also remains impressive. The stock has surged 35.1% year to date, outperforming the industry’s growth of 27% as well as the S&P 500’s 11.7% returns.

Why is Visa an Attractive Pick?

Strong Guidance: For fiscal 2017, Visa expects annual net revenue rise of 20%, much higher than 9% in fiscal 2016.  Adjusted earnings per share growth are projected to be 20% on a normal dollar basis compared with approximately 8% increase in fiscal 2016.

Top-line Growth: Revenue growth remained impressive at Visa, reflected by its CAGR of 20% over the past five fiscal years (2012-2016). This increasing trend continued even in the first three quarters of fiscal 2017. The company should carry on with a solid revenue momentum, given its strong core business in developed regions as well as advancement opportunities in international and emerging markets with low penetration rates.

Growth in Electronic Payments: In recent years, the shift within the global payment industry from paper-based forms of payment such as cash and checks toward electronic payment mode like debit-credit card transactions has created substantial opportunities for Visa’s business to flourish.

Strong Balance Sheet Position: Visa debt/equity ratio is valued at 0.5 compared with the industry’s 0.6, thereby indicating relatively lower debt burden. Visa enjoys a solid cash and available-for-sale investment position along with consistent free cash flow. This provides an operating leverage to the balance sheet, apart from acquisition opportunities as well as scope for capital expenditure to drive long-term growth.

Key Picks

Some other stocks worth considering from the same space are Western Union Co. (WU - Free Report) , Vantiv Inc. and Total System Services, Inc. , each holding a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Western Union beat earnings estimates in two of the last four quarters, with an average positive earnings surprise of 4%.

Vantiv is an integrated payment processor engaged in providing advanced technology solutions for businesses and financial institutions. The stock outpaced earnings estimates in each of the last four quarters with an average positive earnings surprise of 3.6%.

Total System Services provides global commerce solutions. The company facilitates payment exchange between buyers and sellers. It surpassed earnings estimates in three of the last four quarters with the average surprise beat being 3.5%.

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