3 Reasons to Buy Visa Stock Like There's No Tomorrow

Visa (NYSE: V) has historically been a wonderful investment. Shares have climbed 1,790% higher since their initial public offering in March 2008. That gain would've seriously boosted one's portfolio performance, without a doubt.

Shares currently trade 8% off their all-time high (as of Aug. 22). Besides the recent dip, here are three reasons investors should consider buying Visa stock like there's no tomorrow.

Steady growth

Investors are always enamored with companies that are growing like wildfire. But what they fail to realize is that often, these gains are short-lived because they aren't sustainable.

Here's where Visa truly shines. Its growth certainly might not turn any heads. But it's very durable. In the last decade, the company has reported more than a 7.8% revenue gain in every year (except the 4.9% dip during pandemic-filled fiscal 2020). That's an impressive trend.

Investors can be optimistic that this momentum should continue for the foreseeable future. More than 50%of Americans still use cash for some of their weekly transactions. That's a surprisingly high rate, especially for one of the world's most developed economies.

Just imagine the situation in emerging markets, where development is further behind. Visa has ample opportunity to gain from the proliferation of cashless transactions in areas like Latin America, Africa, and Southeast Asia. This gives it a long growth runway.

Huge profits

One of Visa's most impressive traits has got to be its extremely high level of profitability. Between fiscal 2018 and fiscal 2023, earnings per share climbed at an annualized pace of 13.5%. That's better than the yearly revenue growth rate, which clearly demonstrates a scalable business model.

Because Visa's technological infrastructure is mostly built out, sizable capital expenditures aren't necessary, which results in tremendous free cash flow generation. And every additional transaction the company handles should carry very high margins. This helps explain why Visa's overall operating margin was a phenomenal 67% in third-quarter 2024 (ended June 30).

Even dominant leaders in their respective industries, like Apple , Netflix , Nike , Costco , Chipotle , or JPMorgan , for example, don't come anywhere close to generating the kind of margins that Visa does. This is a business that's truly in a league of its own.

Network effects

I think that investors can significantly improve their success by focusing exclusively on companies that possess an economic moat. That way, their holdings have some sort of sustainable protection that helps to defend their industry position against rivals and new entrants. This is the hallmark of a quality enterprise.

Visa fits squarely into this category. It possesses network effects . There are 4.5 billion Visa cards in circulation around the globe, and there are over 130 million merchant locations that accept these cards as a method of payment. This ubiquity is unmatched.

Banks want to issue credit cards that work with the Visa network, and people sign up for them, because of how widely accepted they are. The utility speaks for itself.

On the other hand, merchants want to set up their payments systems to accept Visa because so many people have these cards in their wallets. They don't want to lose customers and give up potential sales.

Visa's entrenched setup makes it almost impossible for anyone to develop a rival payment network from scratch. You'd not only have to solve the chicken-or-egg problem, you'd have to convince merchants, consumers, and banks to want to adopt a totally new system. Good luck.

In addition to durable growth and high profits, Visa's network effects are yet another reason to buy the stock like there's no tomorrow.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Chipotle Mexican Grill, Costco Wholesale, JPMorgan Chase, Netflix, Nike, and Visa. The Motley Fool recommends the following options: long January 2025 $47.50 calls on Nike and short September 2024 $52 puts on Chipotle Mexican Grill. The Motley Fool has a disclosure policy .