Prediction: This Warren Buffett Stock Will Join Berkshire Hathaway in the $1 Trillion Club by 2030

In less than two months, Warren Buffett will step down as CEO (but remain chairman) of Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B). Under Buffett's leadership, Berkshire became the only U.S.-based nontech-focused company to surpass $1 trillion in market capitalization.

In addition to its control over insurance businesses, BNSF Railway, Berkshire Hathaway Energy, and a variety of retail, manufacturing, and services companies, Berkshire Hathaway owns positions in over 40 publicly traded companies, including a $2.7 billion stake in Visa (NYSE: V).

Here's why Visa has what it takes to join Berkshire in the $1 trillion club by 2030, and why the dividend-paying growth stock is a great buy now.

Image source: Getty Images.

Visa's practically perfect business model

Visa is a wonderful long-term investment due to its simplicity. The payment processor generates revenue from transaction volume (total dollar amount of transactions) and processed transactions (total number of transactions). This means that it makes money every time one of its cards is swiped, inserted, tapped, or processed digitally.

Unlike American Express, which issues its own cards, Visa and Mastercard work with financial institutions to issue cards -- making them higher-margin businesses. However, since American Express bears the credit risk, it has more upside potential.

Visa's predictability makes it an ideal fit for risk-averse investors looking for a steady growth stock. In Visa's latest fiscal year, which ended on Sept. 30, Visa grew net revenue by 11%, payments volume by 8%, processed transactions by 10%, and non-generally accepted accounting principles (non-GAAP) earnings per share (EPS) by 14%.

V Revenue (TTM) data by YCharts

Visa's results barely took a hit during the pandemic (non-GAAP EPS declined by just 7%), which is a testament to the stability of its business model. By comparison, more cyclical industries within the financial sector experienced much sharper slowdowns during the pandemic.

The road to $1 trillion

Visa sports a market cap of $632 billion at the time of this writing. To get to $1 trillion in five years (before the end of 2030), Visa's stock price would have to increase at a compound annual growth rate of 9.6%.

In the last six months, the S&P 500 (SNPINDEX: ^GSPC) has gained 12%, but Visa has tumbled over 10% -- pushing its price-to-earnings (P/E) ratio down to 32.2 compared to a 10-year median P/E of 34.3.

Given that Visa is at a reasonable valuation and isn't priced to perfection, its stock price could continue growing at the same rate as its earnings growth over the long term, unless sentiment changes and the valuation compresses.

In fact, Visa's growth rate could slow, and it could still hit $1 trillion in market value without needing its valuation to expand. Over the last five years, Visa has grown non-GAAP EPS at an average annual rate of 18%.

Granted, Visa's earnings growth rate over the next five years will likely be lower than the last five. Its network is already massive, so growth may slow as the business matures. What's more, consumer spending could continue to be pressured by weakening economic growth and cost-of-living increases.

Analyst consensus estimates have Visa generating $12.81 (11.7% year-over-year growth) in fiscal 2026 EPS and $14.43 in fiscal 2027 EPS (12.7% year-over-year growth). Still, even if Visa grows in the low double digits, there's every reason to believe it can reach a $1 trillion market cap by 2030.

A balanced buy for long-term investors

In today's premium-priced market, Visa stands out as a company investors can build their portfolio around. The stock is fairly priced, and the company has a clear runway for future earnings growth that is not dependent on favorable economic conditions.

The business is extremely high-margin and predictable, since Visa doesn't bear the credit risk. Visa generates a substantial amount of free cash flow, which enables it to maintain an impeccably strong balance sheet.

Add it all up, and Visa should have what it takes to join Berkshire Hathaway in the $1 trillion by 2030, and in turn, potentially beat the S&P 500 if it averages its historical annual return of 10% per year.

American Express is an advertising partner of Motley Fool Money. Daniel Foelber, CFP has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway, Mastercard, and Visa. The Motley Fool has a disclosure policy.