Visa Under Pressure: Better Buys Emerge in WES and EHC

Investors are advised to consider Western Midstream Partners and Encompass Health as potentially better investments than Visa, which faces slowing growth and regulatory challenges. Performance metrics favor the alternative stocks due to lower valuations and higher growth.

Date: 09-09-2024

AI Rating: 5

Visa (NYSE:V) investors might be reconsidering their positions as the performance metrics indicate that both Western Midstream Partners (NYSE:WES) and Encompass Health (NYSE:EHC) could present more compelling investment opportunities. Indeed, Visa has been experiencing slower revenue growth and is burdened with regulatory pressures that might hinder its future expansion.

1. Earnings and Operating Metrics: The text highlights the comparative earnings-before-interest-and-taxes (EBIT) valuation for Western Midstream Partners, which stands at $9.67 per dollar of EBIT compared to Visa's $19.32. Furthermore, annual growth rates show WES at 11.0% and EHC at greater than Visa’s (9.7%). This suggests that WES and EHC are better positioned for profit capture over time.

2. Operating Profit Growth: Both WES and EHC also display robust quarterly growth—WES at 23% versus Visa's 9.6%. This larger expansion rate for new revenues could lead to more rapid increases in stock prices for WES and EHC, increasing their attractiveness to potential investors.

3. Profit Margins: The margin trends indicate a troublesome path for Visa as it has witnessed a slight decline in margins (-0.09%) while WES shows an improvement (3.8%). This divergence suggests that transactional efficiencies and operational effectiveness at WES could lead to healthier profit margins moving forward.

4. Revenue Growth Trends: The analysis puts forth that WES has the highest revenue growth trajectory over the past year and quarter, which can play a significant role in determining its stock's upward momentum.

5. Cash Flow and Buybacks: Despite these challenges, Visa maintains strong cash generation capabilities that support stock buybacks. However, this might not be sufficient, considering the overall competition from WES and EHC, which are outpacing Visa's growth fundamentals.

Overall, the current data suggests that Visa may remain under pressure due to its higher valuation coupled with lower growth compared to its counterparts, leading to a potential shift in market support favoring WES and EHC.

Stocks: V WES EHC