Given my excitement about Visa’s fall in stock price yesterday, I wanted to walk through my viewpoint of why I considered $60 to be a fair value for the stock but consider a $70 price based on current earnings estimates to be somewhat outside the zone of reasonableness that I would prefer to pay for the stock.
First, I should mention that I use the most recent quarterly earnings figure as my threshold point when valuing this stock. This is different from how I value most non-cyclicals like Johnson & Johnson, Coca-Cola, and Colgate-Palmolive. With the latter three companies, and many of the other companies that comprise the Dividend Aristocrat universe, I prefer to use the trailing twelve-month earnings figures because this is what Benjamin Graham preferred as it naturally carries a certain conservatism with it. You’re not going to go wrong buying Hershey, Brown Forman, and Nike at 19x … Read the rest of this article!