American Express trades at $330.78 per share and has stayed right on track with the overall market, gaining 11.9% over the last six months. At the same time, the S&P 500 has returned 10.5%.
Is AXP a buy right now? Find out in our full research report, it’s free.
Why Are We Positive On American Express?
Recognizable by its iconic green logo and the slogan "Don't leave home without it," American Express (NYSE: AXP) is a global payments company that issues credit and charge cards, processes merchant transactions, and offers travel and lifestyle benefits to consumers and businesses.
1. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
American Express’s EPS grew at a spectacular 24.3% compounded annual growth rate over the last five years, higher than its 10.3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
2. Growing TBVPS Reflects Strong Asset Base
Tangible book value per share (TBVPS) is a crucial metric that measures the actual value of shareholders’ equity, stripping out goodwill and other intangible assets that may not be recoverable in a worst-case scenario.
American Express’s TBVPS increased by 12.2% annually over the last five years, and the past two years show a similar trajectory as TBVPS grew at an impressive 13.1% annual clip (from $36.28 to $46.42 per share).
3. Stellar ROE Showcases Lucrative Growth Opportunities
Return on equity, or ROE, quantifies bank profitability relative to shareholder equity - an essential capital source for these institutions. Over extended periods, superior ROE performance drives faster shareholder wealth compounding through reinvestment, share repurchases, and dividend growth.
Over the last five years, American Express has averaged an ROE of 32.1%, exceptional for a company operating in a sector where the average shakes out around 10% and those putting up 25%+ are greatly admired. This shows American Express has a strong competitive moat.
Final Judgment
These are just a few reasons why we're bullish on American Express, but at $330.78 per share (or 20.5× forward P/E), is now the right time to buy the stock? See for yourself in our full research report, it’s free.
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