Visa Inc.VNYSE

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DCF Valuation

DCF Valuation Summary

Hold

Fair Value: $293.42 per share(market-calibrated)

-8.5%

Upside to Fair Value

Current

$320.83

Pure Model

$293.15

Fair Value

$293.42

Bull Case

$380.14

Bear Case

$222.77

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

2.59%

Calibrated Growth

2.51%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $293.15.

What's Driving This Ratingfor V

↓

CapEx normalizing toward maintenance

Historical CapEx is 2.74% of revenue (heavy investment phase). Model fades this to 1.50% by Year 10, freeing up ~$961M in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 65.84% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.

↑

Strong near-term revenue growth

Analyst consensus projects 11.64% revenue growth in Year 1, fading to 5.80% by Year 5 and 2.50% by Year 10. Revenue reaches $77.7B by Year 10 (vs $40.0B today).

✓

Model and market roughly agree

Market-implied terminal growth of 2.59% is close to the model's 2.50% (only 9bps apart). The DCF assumptions are well-aligned with how the market is pricing this stock.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 80.96% indicates efficient cash generation. FCF reaches $42.9B by Year 10 (55.27% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.78

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)8.01%

Cost of Debt

Pre-tax Cost of Debt2.32%

Tax Rate17.10%

After-tax Cost of Debt1.93%

Equity Weight (E/V)96.12%

Debt Weight (D/V)3.88%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (96.12% × 8.01%) + (3.88% × 1.93%)

= 7.77%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$44.7B	$54.3B	$64.4B	$70.8B	$77.7B
EBIT	$29.4B	$35.7B	$42.4B	$46.6B	$51.1B
Tax	$5.0B	$6.1B	$7.3B	$8.0B	$8.7B
NOPAT	$24.4B	$29.6B	$35.2B	$38.6B	$42.4B
+ Depreciation	$1.1B	$1.3B	$1.6B	$1.7B	$1.9B
- Capex	$1.2B	$1.3B	$1.4B	$1.4B	$1.2B
- Δ NWC	$465M	$502M	$353M	$303M	$189M
Free Cash Flow	$23.8B	$29.1B	$35.0B	$38.7B	$42.9B
Discount Factor	0.928	0.799	0.688	0.592	0.473
Present Value	$22.1B	$23.3B	$24.0B	$22.9B	$20.3B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$42.9B

Terminal Growth Rate2.50%

WACC7.77%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$834.5B

PV of Terminal Value$394.7B

Exit Multiple Method

Year 10 EBITDA$53.0B

Exit Multiple (EV/EBITDA)12.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$636.4B

PV of Terminal Value$301.0B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$226.4B

PV of Terminal Value$394.7B

Enterprise Value$621.2B

(-) Net Debt$5.0B

Equity Value$616.2B

Shares Outstanding1.9B

Price per Share$317.28

Exit Multiple Method

PV of Projected FCFs$226.4B

PV of Terminal Value$301.0B

Enterprise Value$527.5B

(-) Net Debt$5.0B

Equity Value$522.5B

Shares Outstanding1.9B

Price per Share$269.03

Pure Model Fair Value

$293.15

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.50%	2.00%	2.50%	3.00%	3.50%
5.77%	$369.91	$390.59	$417.58	$454.31	$507.19
6.77%	$315.66	$327.83	$342.85	$361.85	$386.65
7.77%	$276.12	$283.90	$293.15	$304.35	$318.16
8.77%	$245.56	$250.82	$256.92	$264.08	$272.60
9.77%	$220.96	$224.67	$228.89	$233.74	$239.36

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$222.77

-30.6% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.98

Base Case

$293.15

-8.6% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 0.78

Bull Case

$380.14

18.5% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.66

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Financial Services Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth11.64%

Year 3 Revenue Growth10.18%

Year 5 Revenue Growth5.80%

Year 7 Revenue Growth4.48%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin65.84%

Tax Rate17.10%

Historical Capex / Rev2.74%

Terminal Capex / Rev1.50%

NWC / Revenue10.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 12x EV/EBITDA (Financial Services sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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