Visa's Stock Price Reaches New Heights: Is It Still Undervalued?

Visa's stock price has increased by 73% over the past five years, reaching $370.93. However, the question remains whether this price is supported by the company's returns on capital.

The Excess Returns model suggests that Visa can efficiently turn each dollar of shareholder equity into earnings above its equity cost, with an average return on equity (ROE) of 72.42% and a cost of equity of $1.57 per share.

This gap leads to a stable EPS estimate of $15.47 per share on a stable book value base of $21.36 per share, indicating that Visa is modeled to earn an excess return of $13.90 per share over its equity charge.

The market may be already factoring in optionality from onchain payment rails into the excess return profile due to Visa's recent move into stablecoin settlement and blockchain infrastructure.