Despite initial weakness, Visa’s (NYSE: V) stock price closed at a new all-time high on Wednesday after delivering yet another strong set of results. The company beat analyst estimates for both revenue and earnings for the 12th consecutive quarter.

Third-quarter revenue grew 11% to $5.84 billion on payment volume growth of 9%. In addition, the number of transactions processed grew by 12%. Adjusted EPS grew by 14% year-over-year to $1.37, 5 cents ahead of analyst expectations.

The company expects full-year revenue growth to be in the low double digits. They guided full-year EPS slightly lower but still in the mid to high teens.

 

Where to Now?

This was another very solid result from Visa and explains why the stock is now up 36% in 2019 and 240% in the last 5 years. There is no reason not to like the company. Payment companies like Visa and Mastercard have managed to benefit from the growth of e-commerce and the transition to a cashless economy, while also profiting from the bricks-and-mortar economy.

If there is a downside to the story it can only be the stock price and the fact that sentiment is overwhelmingly bullish. Just about every analyst recommendation on the stock in the last few years has been a buy.

 

Is It Worth the Price?

Visa is not exactly cheap. The trailing price multiple is in the high 30s and the forward multiple in the low 30s. The price-to-sales ratio is also very high at over 17. These numbers are high when one considers growth is unlikely to be higher than 20% in the next few years. On the other hand, the company generates a solid return on equity and has room to improve margins as it grows and benefits from economies of scale.

Investors have become accustomed to paying a premium for the stock. That won’t change unless the fundamentals change. It also continues to appear a little cheaper than Mastercard which makes the price appear more reasonable. Visa is the market leader with 61.5% of the global payments market, while Mastercard (NYSE: MA) trails with only 25% of the market.

 

The Risk is the Economy

Investors who buy at the current price will still be rewarded in the long term if the company continues on the current growth trajectory. The risk is that Visa is closely tied to the global economy. A global, or U.S., recession would no doubt halt Visa’s growth very quickly.

In the short term, any price weakness will no doubt be seen as an opportunity and a correction would probably be short-lived. In the longer term, the global economy is what matters most, and any sign of economic weakness will spook investors.