# Should you be tempted to sell Visa Inc. (NYSE: V) because of its P / E ratio?

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The aim of this article is to teach you how to price- Earnings Ratio (P / E), we do a basic P / E analysis on Visa Inc. (NYSE: V) to help you decide whether the stock is worth further research. Visa is 36.81 value for money, based on the past twelve months. This corresponds to a return on earnings of approximately 2.7%. “Data-reactid =” 27 “> This article explains how to use the price-to-earnings (P / E) ratio. We apply a basic principle to P / E analysis by Visa Inc. (NYSE: V) so you can make a decision whether the stock is worth further investigation. Visa is 36.81 value for money, based on the past twelve months. This corresponds to a return on earnings of around 2.7%.

<p class = "canvas-atom canvas-text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = " Check out our latest Visa analysis “data-reactid =” 28 “> Check out our latest Visa analysis

### How do you calculate the P / E ratio of Visa?

<p class = "canvas-atom canvas-text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = "The Formula for P / E is: “data-reactid =” 30 “> The Formula for P / E is:

Price-earnings ratio = share price ÷ earnings per share (EPS)

Or for visas:

P / E of 36.81 = USD 196.05 ÷ USD 5.33 (based on the year to September 2019.)

### Is it good value for money?

The higher the P / E ratio, the higher the price of a company in relation to its lagging result. This is not a good thing or a bad thing in itself, but a high P / E means that buyers have a higher opinion of the prospects of the business compared to stocks with a lower P / E.

### How is the P / E ratio of Visa compared to its competitors?

Based on the P / E ratio, we can get an indication of market expectations. The figure below shows that the average P / E (32.0) for IT companies is lower than Visa P / E.

<p class = "Canvas-Atom Canvas-Text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "This means that the market expects Visa to outperform others The market is optimistic about the future, but that does not guarantee future growth, so investors should take a closer look at the issue when company insiders bought or sold“data-reactid =” 50 “> This means that the market expects Visa to outperform other companies in its industry. The market is optimistic about the future, but that does not guarantee future growth. Therefore, investors should delve deeper when company insiders bought or sold,

### How growth rates affect P / E

In general, the rate of earnings growth has a major impact on a company’s earnings. This is because companies that quickly increase earnings per share quickly increase the E in the equation. In this case, the P / E ratio drops fairly quickly. A lower P / E should indicate that the stock is cheap compared to others – and this could attract buyers.

Visa has increased earnings per share by an impressive 20% over the past twelve months. And earnings per share have increased by 20% a year over the past five years. This could justify a relatively high P / E ratio.

### Don’t forget: The P / E does not take into account debts or bank deposits

It is important to note that the P / E takes into account market capitalization and not company value. So it won’t reflect the benefit of cash or the disadvantage of debt. Exactly the same company would hypothetically deserve a higher P / E ratio if it had a strong balance sheet than if it had a weak one with a lot of debt because a cashed company can spend on growth.

This expenditure may be good or bad in the long run, but the point is that the balance is not shown in this quota.

### Does debt affect Visa value for money?

Visa’s net debt is 1.1% of market capitalization. So there aren’t as many options as with net cash, but debt doesn’t have a big impact on the P / E.

### The balance of the P / E ratio of Visa

Visa’s P / E is 36.8 above the market average (18.9). While the company uses modest debt, earnings growth has been very good lately. It is therefore not particularly surprising that it has an above-average P / E ratio.