In this article I am going to analyze Visa Inc. Stock which its ticker (V). I am going to use Price/Book value ratio the same as I did with other financial organizations.
First let us see what is the growth rate of JPM’ Book or equity value through the last five years:
As you can see the equity increased from year 2017 where it was 32.76 Billion until it reached 35.58 Billion in 2022 with growth rate equal to 1.67%.
Now that we have the growth rate of Visa equity in the last years, we are going to use this growth rate to estimate what will its equity be in 2027 ,which is five years from now by applying the following formula:
FV=PV(1+i)n
- Where
- PV = Visa Equity in year 2022 = 35.58 Billion.
- i = growth rate of Book value estimated above = 1.67%
- n = years of investment = 5 years in 2027
By substitute the numbers estimated early in the above formula, I end up with VISA Equity in year 2027 equal to 38.64 Billion$.
Second, we need to find how much the equity per share will be in 2027 and all what we need to do is to divided the estimated equity above for year 2027 by the total number of shares for VISA and that will equal to:
(Equity/Share)= (38.64 Billion) / (2.06 Million) = 18.75
Now we can estimate two scenarios for VISA stock price which is Bull market and the bear market.
For Bull market, I am going to take the highest (P/B) ratio which was 11.36 in year 2021, to see what will be the price of VISA stock in 2027:
Bull market JPM Stock’s price in 2027= (11.36)*(18.75) =213$.
For Bear market, I will take the lowest (P/B) ratio which was 6.81 in year 2017, to see what will be the price of VISA stock in 2027.
Bear market VISA Stock’s price in 2027= (6.81)*(18.75) = 127.68$.
As of writing this article, VISA stock price is 217 $ which is above both the Bull market estimated price and Bear market estimated price, therefor, I believe I am going to skip this stock and look for another opportunity.
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