Visa Looks Expensive -- Is It a Buy?
Visa (NYSE: V), the world's largest electronic payments company, has seen its stock price move steadily upward over the past decade. Over the past 10 years, the stock has posted an annualized return of more than 28%, which is far better than the S&P 500's return over that span. This year, through the COVID-19 pandemic, it has continued to rise, up almost 9% year to date, and was trading around $204 per share at Wednesday's close.
Visa has a price-to-earnings (P/E) ratio of about 39, which is higher than the S&P 500 average. The P/E ratio is a commonly used valuation metric that measures a company's share price compared to its annual earnings per share. A high P/E ratio can be dangerous if the expectations don't match the reality of the company's future growth prospects.
Some investors may be wondering if Visa has grown too expensive, given its higher P/E ratio. While it may look expensive to some, it is not. In fact, Visa looks like a great buy. Here's why.
Source Fool.com
