Intrinsic value of VISA Cl A - V

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$95.58

  Intrinsic Value

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  Value-price divergence*

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$95.58

 
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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of V stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 221.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  8.66
  25.10
  23.09
  21.28
  19.65
  18.19
  16.87
  15.68
  14.61
  13.65
  12.79
  12.01
  11.31
  10.68
  10.11
  9.60
  9.14
  8.72
  8.35
  8.02
  7.72
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
Revenue, $m
  15,082
  18,868
  23,224
  28,166
  33,702
  39,832
  46,551
  53,851
  61,720
  70,147
  79,116
  88,617
  98,637
  109,169
  120,205
  131,742
  143,782
  156,326
  169,382
  182,962
  197,078
  211,747
  226,992
  242,834
  259,302
  276,425
  294,235
  312,767
  332,061
  352,158
  373,099
Variable operating expenses, $m
 
  6,169
  7,245
  8,467
  9,835
  11,349
  13,010
  14,813
  16,758
  18,840
  21,057
  21,898
  24,374
  26,976
  29,703
  32,554
  35,529
  38,629
  41,855
  45,211
  48,699
  52,324
  56,091
  60,006
  64,075
  68,306
  72,707
  77,287
  82,054
  87,020
  92,195
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  7,199
  6,169
  7,245
  8,467
  9,835
  11,349
  13,010
  14,813
  16,758
  18,840
  21,057
  21,898
  24,374
  26,976
  29,703
  32,554
  35,529
  38,629
  41,855
  45,211
  48,699
  52,324
  56,091
  60,006
  64,075
  68,306
  72,707
  77,287
  82,054
  87,020
  92,195
Operating income, $m
  7,883
  12,699
  15,979
  19,700
  23,867
  28,482
  33,541
  39,037
  44,962
  51,306
  58,060
  66,719
  74,264
  82,193
  90,502
  99,188
  108,252
  117,697
  127,527
  137,751
  148,378
  159,423
  170,901
  182,829
  195,227
  208,118
  221,527
  235,481
  250,007
  265,137
  280,904
EBITDA, $m
  8,385
  15,094
  18,579
  22,533
  26,961
  31,865
  37,240
  43,080
  49,376
  56,117
  63,293
  70,893
  78,909
  87,334
  96,163
  105,393
  115,024
  125,060
  135,505
  146,368
  157,661
  169,397
  181,592
  194,266
  207,440
  221,138
  235,386
  250,212
  265,647
  281,724
  298,477
Interest expense (income), $m
  244
  556
  828
  1,143
  1,499
  1,899
  2,341
  2,826
  3,353
  3,921
  4,529
  5,177
  5,862
  6,585
  7,345
  8,142
  8,975
  9,844
  10,749
  11,691
  12,671
  13,690
  14,749
  15,849
  16,992
  18,181
  19,417
  20,702
  22,039
  23,432
  24,882
Earnings before tax, $m
  8,012
  12,143
  15,150
  18,557
  22,368
  26,583
  31,200
  36,211
  41,609
  47,385
  53,530
  61,543
  68,401
  75,607
  83,156
  91,046
  99,278
  107,853
  116,778
  126,060
  135,707
  145,733
  156,152
  166,980
  178,235
  189,938
  202,111
  214,779
  227,968
  241,705
  256,022
Tax expense, $m
  2,021
  3,279
  4,091
  5,010
  6,039
  7,178
  8,424
  9,777
  11,234
  12,794
  14,453
  16,617
  18,468
  20,414
  22,452
  24,582
  26,805
  29,120
  31,530
  34,036
  36,641
  39,348
  42,161
  45,084
  48,123
  51,283
  54,570
  57,990
  61,551
  65,260
  69,126
Net income, $m
  5,991
  8,864
  11,060
  13,547
  16,329
  19,406
  22,776
  26,434
  30,375
  34,591
  39,077
  44,926
  49,933
  55,193
  60,704
  66,464
  72,473
  78,733
  85,248
  92,023
  99,066
  106,385
  113,991
  121,895
  130,111
  138,654
  147,541
  156,788
  166,416
  176,445
  186,896

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  8,938
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  64,035
  68,860
  84,760
  102,797
  123,000
  145,371
  169,893
  196,535
  225,257
  256,010
  288,746
  323,420
  359,991
  398,426
  438,704
  480,812
  524,750
  570,532
  618,184
  667,743
  719,261
  772,801
  828,437
  886,257
  946,358
  1,008,849
  1,073,849
  1,141,487
  1,211,903
  1,285,247
  1,361,677
Adjusted assets (=assets-cash), $m
  55,097
  68,860
  84,760
  102,797
  123,000
  145,371
  169,893
  196,535
  225,257
  256,010
  288,746
  323,420
  359,991
  398,426
  438,704
  480,812
  524,750
  570,532
  618,184
  667,743
  719,261
  772,801
  828,437
  886,257
  946,358
  1,008,849
  1,073,849
  1,141,487
  1,211,903
  1,285,247
  1,361,677
Revenue / Adjusted assets
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
Average production assets, $m
  21,317
  26,660
  32,816
  39,799
  47,621
  56,282
  65,776
  76,091
  87,211
  99,117
  111,791
  125,216
  139,375
  154,256
  169,849
  186,152
  203,163
  220,888
  239,337
  258,525
  278,471
  299,199
  320,739
  343,125
  366,394
  390,588
  415,753
  441,940
  469,203
  497,599
  527,190
Working capital, $m
  6,267
  -3,340
  -4,111
  -4,985
  -5,965
  -7,050
  -8,239
  -9,532
  -10,924
  -12,416
  -14,004
  -15,685
  -17,459
  -19,323
  -21,276
  -23,318
  -25,449
  -27,670
  -29,981
  -32,384
  -34,883
  -37,479
  -40,178
  -42,982
  -45,896
  -48,927
  -52,080
  -55,360
  -58,775
  -62,332
  -66,039
Total debt, $m
  15,882
  23,665
  32,648
  42,839
  54,254
  66,893
  80,748
  95,802
  112,029
  129,404
  147,900
  167,491
  188,154
  209,870
  232,627
  256,418
  281,243
  307,110
  334,033
  362,034
  391,141
  421,391
  452,826
  485,494
  519,451
  554,759
  591,483
  629,699
  669,484
  710,923
  754,106
Total liabilities, $m
  31,123
  38,906
  47,889
  58,080
  69,495
  82,134
  95,989
  111,043
  127,270
  144,645
  163,141
  182,732
  203,395
  225,111
  247,868
  271,659
  296,484
  322,351
  349,274
  377,275
  406,382
  436,632
  468,067
  500,735
  534,692
  570,000
  606,724
  644,940
  684,725
  726,164
  769,347
Total equity, $m
  32,912
  29,954
  36,870
  44,717
  53,505
  63,236
  73,903
  85,493
  97,987
  111,364
  125,604
  140,688
  156,596
  173,315
  190,836
  209,153
  228,266
  248,182
  268,910
  290,468
  312,879
  336,168
  360,370
  385,522
  411,666
  438,849
  467,124
  496,547
  527,178
  559,082
  592,329
Total liabilities and equity, $m
  64,035
  68,860
  84,759
  102,797
  123,000
  145,370
  169,892
  196,536
  225,257
  256,009
  288,745
  323,420
  359,991
  398,426
  438,704
  480,812
  524,750
  570,533
  618,184
  667,743
  719,261
  772,800
  828,437
  886,257
  946,358
  1,008,849
  1,073,848
  1,141,487
  1,211,903
  1,285,246
  1,361,676
Debt-to-equity ratio
  0.483
  0.790
  0.890
  0.960
  1.010
  1.060
  1.090
  1.120
  1.140
  1.160
  1.180
  1.190
  1.200
  1.210
  1.220
  1.230
  1.230
  1.240
  1.240
  1.250
  1.250
  1.250
  1.260
  1.260
  1.260
  1.260
  1.270
  1.270
  1.270
  1.270
  1.270
Adjusted equity ratio
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  5,991
  8,864
  11,060
  13,547
  16,329
  19,406
  22,776
  26,434
  30,375
  34,591
  39,077
  44,926
  49,933
  55,193
  60,704
  66,464
  72,473
  78,733
  85,248
  92,023
  99,066
  106,385
  113,991
  121,895
  130,111
  138,654
  147,541
  156,788
  166,416
  176,445
  186,896
Depreciation, amort., depletion, $m
  502
  2,395
  2,600
  2,833
  3,094
  3,383
  3,699
  4,043
  4,414
  4,811
  5,233
  4,174
  4,646
  5,142
  5,662
  6,205
  6,772
  7,363
  7,978
  8,617
  9,282
  9,973
  10,691
  11,437
  12,213
  13,020
  13,858
  14,731
  15,640
  16,587
  17,573
Funds from operations, $m
  2,048
  11,260
  13,660
  16,380
  19,423
  22,789
  26,475
  30,477
  34,788
  39,402
  44,310
  49,100
  54,579
  60,335
  66,366
  72,669
  79,245
  86,096
  93,226
  100,641
  108,349
  116,359
  124,682
  133,333
  142,324
  151,674
  161,399
  171,520
  182,056
  193,032
  204,469
Change in working capital, $m
  -3,526
  -670
  -771
  -875
  -980
  -1,085
  -1,189
  -1,292
  -1,393
  -1,491
  -1,588
  -1,682
  -1,774
  -1,864
  -1,953
  -2,042
  -2,131
  -2,220
  -2,311
  -2,404
  -2,499
  -2,597
  -2,698
  -2,804
  -2,915
  -3,031
  -3,152
  -3,280
  -3,415
  -3,557
  -3,707
Cash from operations, $m
  5,574
  19,997
  14,431
  17,255
  20,402
  23,874
  27,664
  31,769
  36,181
  40,893
  45,898
  50,782
  56,352
  62,199
  68,319
  74,711
  81,376
  88,316
  95,537
  103,044
  110,847
  118,955
  127,381
  136,137
  145,239
  154,705
  164,552
  174,800
  185,471
  196,589
  208,176
Maintenance CAPEX, $m
  0
  -711
  -889
  -1,094
  -1,327
  -1,587
  -1,876
  -2,193
  -2,536
  -2,907
  -3,304
  -3,726
  -4,174
  -4,646
  -5,142
  -5,662
  -6,205
  -6,772
  -7,363
  -7,978
  -8,617
  -9,282
  -9,973
  -10,691
  -11,437
  -12,213
  -13,020
  -13,858
  -14,731
  -15,640
  -16,587
New CAPEX, $m
  -523
  -5,343
  -6,156
  -6,984
  -7,822
  -8,661
  -9,494
  -10,315
  -11,120
  -11,906
  -12,674
  -13,424
  -14,159
  -14,881
  -15,594
  -16,303
  -17,011
  -17,725
  -18,449
  -19,187
  -19,946
  -20,728
  -21,540
  -22,386
  -23,269
  -24,194
  -25,165
  -26,187
  -27,262
  -28,396
  -29,591
Cash from investing activities, $m
  -10,916
  -6,054
  -7,045
  -8,078
  -9,149
  -10,248
  -11,370
  -12,508
  -13,656
  -14,813
  -15,978
  -17,150
  -18,333
  -19,527
  -20,736
  -21,965
  -23,216
  -24,497
  -25,812
  -27,165
  -28,563
  -30,010
  -31,513
  -33,077
  -34,706
  -36,407
  -38,185
  -40,045
  -41,993
  -44,036
  -46,178
Free cash flow, $m
  -5,342
  13,943
  7,387
  9,177
  11,254
  13,625
  16,294
  19,262
  22,525
  26,080
  29,920
  33,631
  38,020
  42,672
  47,583
  52,747
  58,159
  63,819
  69,725
  75,879
  82,284
  88,944
  95,867
  103,060
  110,533
  118,297
  126,367
  134,755
  143,478
  152,553
  161,998
Issuance/(repayment) of debt, $m
  15,971
  7,783
  8,983
  10,191
  11,414
  12,639
  13,855
  15,053
  16,227
  17,375
  18,496
  19,591
  20,663
  21,716
  22,757
  23,791
  24,825
  25,867
  26,923
  28,001
  29,108
  30,250
  31,435
  32,668
  33,957
  35,307
  36,725
  38,216
  39,785
  41,439
  43,183
Issuance/(repurchase) of shares, $m
  -7,062
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  8,827
  7,783
  8,983
  10,191
  11,414
  12,639
  13,855
  15,053
  16,227
  17,375
  18,496
  19,591
  20,663
  21,716
  22,757
  23,791
  24,825
  25,867
  26,923
  28,001
  29,108
  30,250
  31,435
  32,668
  33,957
  35,307
  36,725
  38,216
  39,785
  41,439
  43,183
Total cash flow (excl. dividends), $m
  3,451
  21,726
  16,370
  19,369
  22,669
  26,265
  30,149
  34,315
  38,753
  43,455
  48,416
  53,222
  58,682
  64,389
  70,340
  76,538
  82,985
  89,686
  96,648
  103,880
  111,392
  119,194
  127,301
  135,728
  144,490
  153,605
  163,092
  172,970
  183,263
  193,992
  205,181
Retained Cash Flow (-), $m
  -3,070
  -5,980
  -6,916
  -7,846
  -8,788
  -9,731
  -10,667
  -11,590
  -12,494
  -13,378
  -14,240
  -15,083
  -15,908
  -16,719
  -17,521
  -18,317
  -19,113
  -19,915
  -20,728
  -21,558
  -22,410
  -23,290
  -24,202
  -25,152
  -26,144
  -27,184
  -28,275
  -29,423
  -30,631
  -31,904
  -33,247
Prev. year cash balance distribution, $m
 
  8,938
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  24,684
  9,454
  11,522
  13,880
  16,533
  19,482
  22,725
  26,259
  30,078
  34,175
  38,138
  42,774
  47,669
  52,819
  58,221
  63,871
  69,771
  75,920
  82,322
  88,981
  95,905
  103,100
  110,576
  118,346
  126,421
  134,817
  143,548
  152,632
  162,087
  171,934
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  23,666
  8,655
  10,027
  11,429
  12,815
  14,139
  15,353
  16,412
  17,278
  17,917
  18,111
  18,253
  18,125
  17,732
  17,093
  16,231
  15,181
  13,981
  12,675
  11,307
  9,920
  8,555
  7,247
  6,028
  4,918
  3,933
  3,081
  2,361
  1,769
  1,295
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Visa Inc. operates as a payments technology company worldwide. The company facilitates commerce through the transfer of value and information among consumers, merchants, financial institutions, businesses, strategic partners, and government entities. It operates VisaNet, a processing network that enables authorization, clearing, and settlement of payment transactions; and offers fraud protection for account holders and assured payment for merchants. The company also offers gateway services for merchants to accept, process, and reconcile payments; manage fraud; and safeguard payment security online, as well as processing services for participating issuers of visa debit, prepaid, and ATM payment products. In addition, it provides digital products, including Visa Checkout that offers consumers an expedited and secure payment experience for online transactions; and Visa Direct, a push payment product platform, which facilitates payer-initiated transactions that are sent directly to the Visa account of the recipient, as well as Visa token service that replaces the card account numbers from the transaction with a token. Further the company offers corporate (travel) and purchasing card products, as well as value-added services. It provides its services under the Visa, Visa Electron, Interlink, V PAY, and PLUS brands. The company has a strategic partnership agreement with Oman Arab Bank to convert the bank’s current electron cards to chip-and-PIN debit cards. Visa Inc. was incorporated in 2007 and is headquartered in San Francisco, California.

FINANCIAL RATIOS  of  VISA Cl A (V)

Valuation Ratios
P/E Ratio 37.4
Price to Sales 14.8
Price to Book 6.8
Price to Tangible Book
Price to Cash Flow 40.2
Price to Free Cash Flow 44.3
Growth Rates
Sales Growth Rate 8.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 26.3%
Cap. Spend. - 3 Yr. Gr. Rate 2.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0.3
LT Debt to Equity 48.3%
Total Debt to Equity 48.3%
Interest Coverage 34
Management Effectiveness
Return On Assets 11.9%
Ret/ On Assets - 3 Yr. Avg. 14.3%
Return On Total Capital 15.2%
Ret/ On T. Cap. - 3 Yr. Avg. 19.1%
Return On Equity 19.1%
Return On Equity - 3 Yr. Avg. 20.4%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 58.1%
EBITDA Margin - 3 Yr. Avg. 63.9%
Operating Margin 52.3%
Oper. Margin - 3 Yr. Avg. 59.4%
Pre-Tax Margin 53.1%
Pre-Tax Margin - 3 Yr. Avg. 59.6%
Net Profit Margin 39.7%
Net Profit Margin - 3 Yr. Avg. 42.7%
Effective Tax Rate 25.2%
Eff/ Tax Rate - 3 Yr. Avg. 28.2%
Payout Ratio 22.5%

V stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the V stock intrinsic value calculation we used $15082 million for the last fiscal year's total revenue generated by VISA Cl A. The default revenue input number comes from 2016 income statement of VISA Cl A. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our V stock valuation model: a) initial revenue growth rate of 25.1% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for V is calculated based on our internal credit rating of VISA Cl A, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of VISA Cl A.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of V stock the variable cost ratio is equal to 34.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for V stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for VISA Cl A.

Corporate tax rate of 27% is the nominal tax rate for VISA Cl A. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the V stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for V are equal to 141.3%.

Life of production assets of 69.2 years is the average useful life of capital assets used in VISA Cl A operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for V is equal to -17.7%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $32912 million for VISA Cl A - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 2319.14 million for VISA Cl A is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of VISA Cl A at the current share price and the inputted number of shares is $221.7 billion.


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Stock chart of V Financial statements of V Annual reports of V
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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