If investors are lucky enough to find the right stocks early on, they could generate some serious wealth given enough time. Visa (V 0.99%) certainly falls into this category, as its shares have produced a total return of 2,560% since their initial public offering in 2008 (as of March 13). A $38,000 investment back then would be worth $1 million today.
The business currently sports a market cap of $644 billion, making it one of the most valuable in the world. As we look ahead, though, is this financial stock a millionaire-maker?
Hard to disrupt
One reason that Visa is a fantastic business is because its competitive position is virtually unassailable. With $4.1 trillion in total payment volume in the last three months of calendar 2024, it has top market share by far in the U.S. with this key metric. This leading position isn’t likely to change anytime soon.
That’s because Visa is essential to the smooth functioning of the economy. If its payment system went down, just imagine the chaos that would ensue. It’s a mission-critical component that helps money flow between banks, consumers, and merchants.
The business also possesses an incredibly powerful network effect. There are 4.7 billion Visa cards accepted at 150 million merchant locations around the globe. The growth of either side immediately makes the entire network more valuable to the other stakeholder group.
If you had access to unlimited capital and whatever other resources you needed, it would still be impossible to create a competing payment platform. To start, you’d need to convince merchants to plug into your system, a tall task given zero historical record of success and the likelihood of there being no cardholders. What’s more, you’d need banks to partner with you to issue credit cards, which also seems unlikely since there’s no place that people would be able to use these cards.
This points to just how powerful a position Visa has. The platform just works for its stakeholders. This drastically reduces the chance of it being disrupted.
In the past decade, there have been numerous fintech enterprises that have found success. However, a valid argument can be made that they actually help accelerate the adoption of digital transactions at the expense of cash and paper-based methods, which supports Visa’s success.
Top-notch financials
Visa can be considered a capital-light compounder. In other words, it requires almost no capital expenditures to grow. That’s because the technological infrastructure to process transactions is already built out.
This explains why the company’s profitability is through the roof. Visa reported a huge 54% net profit margin in Q1 2025 (ended Dec. 31, 2024). And on $9.5 billion in revenue, it produced over $5 billion in free cash flow. Management uses this to fund dividend payouts and share repurchases. You’d struggle to find businesses in better financial shape than Visa.
Keep expectations in check
Anyone who takes a closer look at Visa will agree that this is a high-quality business. It has certainly been a millionaire-maker in the past. But I don’t think it can do the same in the future.
As mentioned before, the company’s market cap of $644 billion indicates a massive entity. Revenue and earnings per share increased at compound annual rates of 9.3% and 12.8%, respectively, in the past five fiscal years. These gains are probably what investors can expect for the foreseeable future. In other words, you won’t see monster growth from Visa today.
The valuation also leaves much to be desired. As of this writing, shares trade at a price-to-earnings ratio of 33.1. That’s slightly below the 10-year average, but it’s nothing close to being a bargain.
It’s best to keep expectations in check, as Visa likely isn’t going to generate market-thumping returns in the years ahead.
Investors should also avoid thinking that a single stock can help them become millionaires one day. The main goal should be to build a diversified portfolio that can get you to your financial goals over the long term.
Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Visa. The Motley Fool has a disclosure policy.
