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Last update on 2024-06-04

Visa (V) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Visa (V) scores 8 out of 9 in the Piotroski F-Score Analysis for 2023, indicating a strong financial position based on profitability, liquidity, and efficiency.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 8

We're running Visa (V) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
1
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
1
Current Ratio is growing?
1
Number of shares not diluted?
1
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
1

The Piotroski F-Score is a rating from 0 to 9 that helps find strong, undervalued investments by measuring profitability, liquidity, and leverage. Visa (V) has a high Piotroski Score of 8, indicating its strong financial position. Visa shows positive net income, growing Return on Assets (ROA), higher operating cash flow than net income, decreasing leverage, increasing current ratio, and decreasing outstanding shares. However, Visa missed a point on gross margin, which slightly decreased from 2022 to 2023. Overall, Visa's financial indicators are highly positive, reflecting its efficient operations and financial stability.

Insights for Value Investors Seeking Stable Income

Even though Visa scored 8 out of 9, which is quite strong, it's essential to investigate the reasons behind the slight drop in gross margin. Nevertheless, Visa's strong profitability, cash flow, decreasing leverage, and commitment to buying back shares make it a solid candidate for investment. It's worth an in-depth look if you're considering steady income and long-term gains in your investments, but keep an eye on any factors affecting its gross margin.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Visa (V)

Company has a positive net income?

Net income is a company's total earnings or profit, taking into account all revenues and costs. Positive net income indicates profitability, a crucial criterion for financial health.

Historical Net Income of Visa (V)

Visa's net income for 2023 is $17,273,000,000, which is significantly positive. When we examine the historical data, the company has shown substantial growth: starting from a loss in 2003 of -$885 million, and turning positive from 2005 onwards. Visa's net income has grown consistently, hitting $17.27 billion in 2023. This upward trajectory underscores Visa's robust profitability and effective financial management. Therefore, Visa earns 1 point for this criterion.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the money a company generates from its normal business operations. A positive CFO indicates that Visa is generating sufficient cash flow from its core business activities, which is a sign of financial health.

Historical Operating Cash Flow of Visa (V)

Visa's CFO for 2023 stands at $20,755,000,000, which is remarkably positive. This trend is not just good for the given criterion but excellent, as illustrated by the historical data. Over the past two decades, Visa's CFO has shown a strong upward trajectory, particularly notable from 2009 onwards. Originally moving from $480.63 million in 2005 to the current level, the company's strong cash flow suggests robust operational performance. This positive cash flow contributes favorably to its valuation and operational resilience. Hence, Visa earns 1 point for this criterion.

Return on Assets (ROA) are growing?

Return on Assets (ROA) measures a company's ability to generate profit from its assets. A higher ROA indicates better efficiency and profitability, making it crucial for investment analysis.

Historical change in Return on Assets (ROA) of Visa (V)

Visa's ROA increased from 0.1776 in 2022 to 0.1963 in 2023, indicating improved profitability and efficiency. This positive trend suggests Visa has become more adept at utilizing its assets to generate returns. Visa earns 1 point for this criterion, reflecting its enhanced operational performance. Furthermore, historical ROA data reveals consistent growth in Visa’s operating cash flow over the past 20 years, supporting the positive interpretation. However, Visa's ROA consistently lags behind the industry median, which highlights potential areas for further improvement in asset efficiency.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income

Historical accruals of Visa (V)

Visa (V) has an operating cash flow of $20,755,000,000 and a net income of $17,273,000,000 for the year 2023. Since the operating cash flow is higher than the net income, this criterion is met, earning Visa 1 point. This trend is notable as it suggests that Visa's core business operations generate sufficient cash to cover its expenses, investments, and dividends without needing external funding. Examining historical data, Visa's operating cash flow has consistently increased over the past 20 years, from $480.63 million in 2005 to $20.755 billion in 2023, while net income has shown substantial growth from $264.7 million in 2005 to $17.273 billion in 2023. This stability and growth reinforce investor confidence in Visa's robust financial health.

Liquidity of Visa (V)

Leverage is declining?

Change in Leverage (differential in Debt-to-Equity ratio) is crucial as it measures a company's financial flexibility and risk.

Historical leverage of Visa (V)

In comparing the Leverage of Visa (V) from 2022 (0.2363) to 2023 (0.2261), we observe a decrease. This reduction signifies that Visa's debt-to-equity ratio has improved, indicating lower financial risk and better financial health. Essentially, with less leverage, Visa has a stronger balance sheet, posing lesser risk to investors. This trend can also imply that Visa's management is effectively controlling debt levels, adding financial stability. Chart analysis spanning twenty years reflects Visa's general low-leverage profile, interrupted by a spike in 2016, which thereafter gradually improved. For this criterion, Visa scores 1 point.

Current Ratio is growing?

The Current Ratio indicates a company's ability to pay its short-term obligations with its current assets. It is crucial for assessing liquidity.

Historical Current Ratio of Visa (V)

The Current Ratio of Visa has increased slightly from 1.4485 in 2022 to 1.4517 in 2023, garnering 1 point in the Piotroski Analysis. An increase in Current Ratio, even marginal, suggests Visa has maintained or enhanced its liquidity position. Historically, Visa’s ratios have shown fluctuations but remained healthy compared to the industry's median. For instance, in 2009, Visa had an extremely robust ratio of 2.0804 compared to the industry median of 1.4233, indicating an above-average liquidity status at that time. Although the increase in 2023 is modest, it is a positive signal, given the context of maintaining liquid assets to cover short-term liabilities.

Number of shares not diluted?

Change in shares outstanding assesses whether the company is diluting shareholder value by increasing the number of shares.

Historical outstanding shares of Visa (V)

In 2022, Visa had 1,651,000,000 outstanding shares, which decreased to 1,618,000,000 in 2023, a reduction of 33 million shares year-over-year. This reduction indicates that the company is actively buying back its own shares, a move generally seen as a positive sign because it often demonstrates management's confidence in the business and is used to return value to shareholders. Over the last 20 years, Visa has steadily reduced its outstanding shares from over 3.1 billion in 2003 to the current level, highlighting a consistent commitment to share buybacks. Therefore, this criterion scores 1 point for Visa.

Operating of Visa (V)

Cross Margin is growing?

Gross Margin compares the proportion of money left over from revenues after accounting for the cost of goods sold. It highlights a company’s efficiency.

Historical gross margin of Visa (V)

Comparing Visa's Gross Margin from 2022 (0.8044) to 2023 (0.7989), there's a slight decrease. Therefore, Visa does not earn a point for this criterion. Though Visa's Gross Margin remains exceptionally high compared to the industry median (which hovers around approximately 0.77 in 2022), this minor dip could be a hint of increased costs or pricing pressures Visa is experiencing.

Asset Turnover Ratio is growing?

Asset turnover measures a company's efficiency in using its assets to generate sales. Higher values indicate greater efficiency and resource utilization.

Historical asset turnover ratio of Visa (V)

Comparing Visa's asset turnover of 0.3711 in 2023 to 0.3481 in 2022, there's an increase. This rise garners a score of 1, signaling improved efficiency. Especially notable since asset turnover rose steadily from 0.2781 in 2017 to 0.3711 in 2023, despite minor dips, reflecting a persistent growth trend.


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