Visa inc: analysis of the number of outstanding shares

Hi,

I am going to focus on an interesting indicator: outstanding shares. This item is interesting for different reasons:

1/ Warren Buffett likes companies which buy back their shares (the same cake (profits) but fewer slices of cake (shares)).

2/ An increase in the amount of outstanding shares will be a signal that the company is expanding and using shares to buy other companies. Although it can be good -if the acquired company has a competititve advantage- It has for effet to reduce the net profit per share (more slices (shares) for the same cake (profits). Ok, if the net profit increases, the net profit per share will rise but I am of the opinion that if it is possible to avoird increasing the amount of shares to expand a company it is a good move (unless the acquisition really enables to increase the moat of the buying company).The big idea is really buu another company if it brings a great avantage or increases your moat: choose well your acquisitions.

3/ A decrease in the amount of shares shows that the company wishes to increase the value of the remaining shares (fewer shares so it will be more expensive to get some (more demand but fewer stocks available) and it will increase the net profit per share. OK, it has to be a true repurchase program (at least 3%). Why such a trigger? If it is small repurchase program, the effect will not be sensed by the market and remember some companies have stock option plans for their employees, which if they are converted will increase the number of outstanding shares.

Visa inc share repurchase program

•  Share repurchase for a total cost of 3,2 billion dollars
• 43 million shares were repurchased.
• It's good to note that in July 2011 a new 1 billion dollars repruchase program has been  authorized. It is a good sign as it shows a willingness to keep reducing the number of outstanding shares. It is a consistent and repetitive practice.
• Moreover, the company doesn't seem to splash the money on an expensive acquisition just for the sake for it. The management is showing a good management of the funds it has available (Ok, there were two acquistions with a respective dilutive effect on the net profit per share of 0,02 cents a share and 0,03 cents a share in 2011 but the acquitions seeked to improve the positionning and speed up it's development. The dilutive effect remains  very low).
• Let's have a look at the diluted earnings per share (it also includes the stock options which can be exercised (they won't neccessarily be all exercised). In other words it includes all the shares of the company and gives a clearer overview of all the shares which exist.

The arnings per share has a consistent upward trend. It is true that we do not have a long historical set of data as the stock was only recently quoted on the stock exchange. Nevertheless, the indicator is very good.

For information, the Class A shares are the one's which are traded on the stock exchange.

Between 2009 and 2011, there was a decrease in the number of outstanding shares (130 million shares less) which represents a 11,3% decrease in the number of outstanding shares.

This is a very good indicator. As Warren Buffett said: bigger slices for the same amount of people or in other words the same cake but for fewer people.

Hope yoou liked the post. Don't hesitate to tell me what you think about it.

Cheers

J

Year	2011	2010	2009	2008	2007
Diluted earnings per share (in dollars)	5,16	4,01	3,1	0,96	N/A
Year	2011	2010	2009
Diluted weighted-average shares outstanding Class A common stock (in millions)	707	739	759
Diluted weghted-average shares outstanding Class B common stock (in millions)	245	245	245
Diluted weighted-average shares outstanding Class C common stock (in millions)	70	112	148
Total	1022	1096	1152