This Industry-Leading Payment Platform Looks Oversold

While the stock market is still near all-time highs, a number of companies haven’t gone along for the ride, with a peak earlier in the year, even as those companies have performed well operationally.

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  • Among the surprising “off the peak” stocks out there, payment company Visa (V) has joined the list, shedding nearly 5 percent on Wednesday and down nearly 20 percent from its 52-week high.

    Shares of the credit card payment company, one of the biggest players in a highly-profitable oligopoly, have now returned under 4 percent in the past year, even as earnings and revenue have grown by double-digits. The latest fear? That branded cards in the UK, a relatively small proportion of revenue, are being shut down next year.

    Action to take: This is a classic example of a stock to buy, thanks to the firm’s strong brand positioning. Shares trade at less than 30 times forward earnings, a relatively inexpensive multiple for earnings up more than 67 percent in the past year. And the company sports a fat 51 percent profit margin. Investors can also get a growing dividend, although the starting yield is a bit low to start at 0.7 percent.

    For traders, shares look oversold and due for a relief rally in the short term. The March $225 calls, last going for about $5.70, offer the potential for mid-to-high double-digit returns on a rebound in shares.

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    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.