Key takeaways
View moreAmerican Express appears moderately undervalued based on its strong financial performance, growth prospects, and current valuation metrics. The company's EV/EBITDA and EV/Sales ratios are significantly below industry averages, while its ROE and profit margins outperform peers. Despite macroeconomic and regulatory risks, AXP's focus on premium customers, expansion into Millennial/Gen-Z markets, and development of SMB technologies offer substantial growth potential that may not be fully reflected in the current stock price.
- American Express demonstrates robust financial health with a Return on Equity of 34.02%, significantly outperforming the industry average of 3.29%.
- The company's focus on premium customers is paying off, with Q1 2025 revenues up 8% year-over-year (FX adjusted) driven by healthy spending from this segment.
- AXP's Enterprise Value to EBITDA ratio of 8.62 suggests it may be undervalued compared to the industry average of 41.67.
- Despite strong historical performance, AXP has underperformed peers like Visa (V) and Capital One (COF) year-to-date, indicating potential short-term challenges.
- Management maintains a positive outlook, reaffirming full-year revenue growth guidance of 8% to 10% and EPS of $15 to $15.50, despite macroeconomic uncertainties.
- The company is strategically investing in technology and SMB acquisitions like Center and Kabbage to drive future growth and enhance customer retention.
- AXP faces key risks including macroeconomic headwinds, regulatory scrutiny, and cybersecurity threats, requiring proactive risk management.
Evaluation summary
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Company Overview:
- American Express Co. (AXP) is a globally integrated payments company that provides credit and charge cards, merchant acquisition and processing services, network services, travel and lifestyle services, and expense management products.
- Key products and services include credit/charge cards, merchant services, network services, travel and lifestyle services, and expense management solutions, serving consumers, small businesses, mid-sized companies, and large corporations globally.
- The company operates through five segments: United States Consumer Services (USCS), Commercial Services (CS), International Card Services (ICS), Global Merchant and Network Services (GMNS), and Corporate and Other.
- For comparative analysis, the company's performance is evaluated against the Financial Select Sector SPDR Fund (XLF) as a benchmark, and Capital One Financial Corp. (COF) and Visa, Inc. (V) as industry peers.
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Financial Performance:
- American Express has demonstrated consistent revenue growth. The most recent quarterly revenue (2025-03-31) was $18.95 billion, compared to $18.40 billion in 2024-06-30, $18.77 billion in 2024-09-30, and $19.21 billion in 2024-12-31.
- Net income for the quarter ending March 31, 2025, was $2.57 billion, compared to $2.99 billion, $2.49 billion, and $2.15 billion in the previous three quarters, respectively.
- The net profit margin for the quarter ending March 31, 2025, was 13.54%, compared to 16.26%, 13.26%, and 11.21% in the previous three quarters, respectively.
- American Express exhibits strong profitability, with a Return on Average Assets of 3.7%, a Return on Average Total Equity of 34.02%, and a Return on Average Total Capital of 18.56% as of March 31, 2025. These figures significantly outperform the industry averages of 0.38%, 3.29%, and 6.93%, respectively.
- The company's EBITDA margin was 29.25% as of March 31, 2025, compared to the industry average of 23.29%.
- According to the earnings call, Q1 2025 revenues were up 8% year-over-year (FX adjusted), and net income was $2.6 billion, or $3.64 per share, driven by healthy spending from premium customers.
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Operational Efficiency:
- Total assets increased from $272.22 billion as of June 30, 2024, to $282.24 billion as of March 31, 2025. Total liabilities also increased from $242.68 billion to $251.04 billion during the same period.
- Working capital, calculated as current assets minus current liabilities, requires further calculation using available data to determine specific figures and trends.
- Net operating cash flow was $4.76 billion for the quarter ending March 31, 2025, compared to $4.53 billion, -$1.81 billion, and $5.78 billion in the previous three quarters, respectively.
- Free cash flow to equity was $4.33 billion for the quarter ending March 31, 2025, compared to $3.97 billion, -$2.27 billion, and $5.28 billion in the previous three quarters, respectively. The free cash flow margin for the same quarter was 0.23.
- Total capital expenditure was $430 million for the quarter ending March 31, 2025.
- Cash dividends paid were $509 million for the quarter ending March 31, 2025, and $1.3 billion of capital was returned to shareholders.
- The total debt to total equity ratio was 169.2 as of March 31, 2025, compared to the industry average of 703.14. The Debt / EBITDA ratio was 2.41.
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Growth Opportunities:
- American Express is focused on enhancing products and services, supporting colleagues, exercising disciplined expense management, and investing strategically for the long term.
- Key areas of investment include technology, control management, customer acquisition, and expanding the membership model.
- The company has refreshed over 150 products over the last five years and plans to continue this strategy.
- According to the earnings call, the company added 3.4 million new cards, with Millennials and Gen-Z comprising over 60% of new consumer accounts.
- The company is building a comprehensive technology ecosystem for SMB customers through acquisitions like Center and Kabbage.
- Net card fees increased 20% FX adjusted, reflecting 27 consecutive quarters of double-digit card fee growth.
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Recent Developments and Market Sentiment:
- The earnings call highlighted that American Express reported a strong Q1 2025, with revenues up 8% year-over-year (FX adjusted) and net income at $2.6 billion, or $3.64 per share.
- Management maintained full-year revenue growth guidance of 8% to 10% and EPS of $15 to $15.50, incorporating macroeconomic outlook changes.
- Analysts focused on spending trends, the impact of tariffs, card refreshes and fee growth, investment strategy, unemployment rate and spending, Millennial and Gen-Z performance, SMB strategy and technology investments, and expense flexibility.
- The company acknowledges increased macroeconomic uncertainty, including potential impacts from tariffs and unemployment, but believes its premium customer base is relatively resilient to economic fluctuations.
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Risks and Threats:
- Key risks identified in SEC filings include macroeconomic conditions, regulatory and legal developments, cybersecurity and data privacy/protection risks, and changes in the competitive landscape.
- Macroeconomic conditions, including recession risks, inflation, interest rate changes, and geopolitical instability, could affect consumer spending and small business performance.
- Heightened regulatory scrutiny and an evolving competitive landscape could impact pricing, operations, and relationships with partners/merchants.
- Cybersecurity and data privacy/protection risks pose ongoing challenges that require robust risk management strategies.
- The company is defending against various merchant antitrust and other claims related to anti-steering and non-discrimination provisions.
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Valuation Analysis:
- The Enterprise Value to EBITDA ratio was 8.62 as of March 31, 2025, compared to the industry average of 41.67. The Enterprise Value to Sales ratio was 2.51, compared to the industry average of 9.12.
- These ratios suggest that American Express may be undervalued compared to its industry peers.
- Potential catalysts include continued strong performance in card member spending, successful integration of recent acquisitions, and effective management of macroeconomic risks.
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Price Performance:
- American Express Co. (AXP) has shown mixed performance compared to Capital One Financial Corp. (COF) and Visa, Inc. (V). Over the past three years, AXP has outperformed both COF and V, with returns of 93.78% compared to 74.06% and 80.83%, respectively. However, in the shorter term, AXP has underperformed. Year-to-date, AXP's return is -0.19%, while COF and V have returns of 9.97% and 17.07%, respectively.
- AXP has generally exhibited higher annualized volatility compared to XLF. For example, in Q2 2025, AXP's volatility ranged from 51.08% to 62.35%, while XLF's ranged from 28.59% to 40.08%.
- The maximum drawdown for AXP was -31.55% on 2022-09-30.
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Future Outlook:
- Management maintains full-year revenue growth guidance of 8% to 10% and EPS of $15 to $15.50.
- This guidance incorporates a macroeconomic outlook with a peak weighted average unemployment rate of around 5.7%.
- The company is focused on enhancing products and services, supporting colleagues, exercising disciplined expense management, and investing strategically for the long term.
- Continued strong performance in card member spending, successful integration of recent acquisitions, and effective management of macroeconomic risks are expected to drive future performance.
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Summary:
- American Express exhibits strong financial health, characterized by consistent revenue growth, efficient operations, and robust profitability.
- The company's focus on premium customers, digital capabilities, and global expansion is expected to drive sustained growth and enhance shareholder value.
- While debt levels have increased, the company's growing equity base provides a solid foundation for long-term financial stability.
- Increased macroeconomic uncertainty, regulatory scrutiny, and cybersecurity risks pose ongoing challenges that require proactive risk management strategies.
- SWOT Analysis:
- Strengths: Strong brand, premium customer base, robust profitability, efficient operations.
- Weaknesses: Increased debt levels, recent underperformance compared to peers.
- Opportunities: Global expansion, digital capabilities, strategic acquisitions.
- Threats: Macroeconomic uncertainty, regulatory scrutiny, cybersecurity risks, competitive pressures.
- Overall, American Express presents a mixed investment profile. While the company demonstrates strong fundamentals and growth potential, it also faces significant risks and challenges. Investors should carefully consider their risk tolerance and investment horizon when evaluating American Express.
Price history
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Fundamentals
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Insights
- American Express exhibits strong financial health, characterized by consistent revenue growth, efficient operations, and robust profitability.
- The company's focus on premium customers, digital capabilities, and global expansion is expected to drive sustained growth and enhance shareholder value.
- While debt levels have increased, the company's growing equity base provides a solid foundation for long-term financial stability.
- Increased macroeconomic uncertainty, regulatory scrutiny, and cybersecurity risks pose ongoing challenges that require proactive risk management strategies.
- Monitoring key financial metrics and adapting to changing market conditions will be crucial to ensure continued success and maintain a competitive advantage.
Analysis
- Revenue
- American Express has demonstrated consistent revenue growth, driven by effective sales strategies and strong market demand for its products and services.
- The company's sales/revenue is significantly greater than the industry average, indicating a strong competitive position.
- While revenue growth is expected to continue, it's important to monitor macroeconomic factors and competitive pressures that could impact future performance.
- Profitability
- American Express exhibits strong profitability, with high returns on assets, equity, and capital, significantly outperforming the industry average.
- The company's net profit margin is also substantially higher than the industry average, reflecting efficient operations and cost management.
- While profitability remains robust, it's important to monitor trends in gross profit margin, net profit margin, and EBITDA margin to ensure sustained performance.
- Liquidity
- American Express maintains a strong liquidity position, supported by increasing cash and short-term investments.
- The company's ability to meet its short-term obligations is enhanced by efficient asset utilization and strategic resource allocation.
- Monitoring cash flow trends and working capital management will be crucial to ensure continued liquidity.
- Solvency
- American Express demonstrates strong solvency, with a low debt-to-equity ratio and a high ability to cover debt with earnings.
- The company's financial leverage is significantly lower than the industry average, indicating a conservative capital structure.
- While debt levels have increased, the company's growing equity base provides a solid foundation for long-term financial stability.
- Operational Efficiency
- American Express exhibits efficient operations, as evidenced by its high EBITDA margin and effective cost management.
- The company's ability to control operating expenses in relation to revenue growth is a positive sign of efficient management.
- Continued focus on operational efficiency will be crucial to sustain profitability and competitive advantage.
- Cash Flow Analysis - American Express has strong cash flow from operations, indicating healthy core business performance. - The company's capital allocation strategy balances organic growth, M&A, and shareholder returns, enhancing long-term value. - Monitoring cash flow trends and capital expenditure decisions will be crucial to ensure sustained financial health and growth.
- Risk Factors
- Increased macroeconomic uncertainty, including potential impacts from tariffs and unemployment, could affect consumer spending and small business performance.
- Heightened regulatory scrutiny and an evolving competitive landscape could impact pricing, operations, and relationships with partners/merchants.
- Cybersecurity and data privacy/protection risks pose ongoing challenges that require robust risk management strategies.
- Future Outlook
- American Express is well-positioned for future growth, supported by its strong financial performance, efficient operations, and strategic investments.
- The company's focus on premium customers, digital capabilities, and global expansion is expected to drive sustained revenue and profit growth.
- Monitoring key financial metrics and adapting to changing market conditions will be crucial to ensure continued success.
- Profitability
Financial statements
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Public filings
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- American Express continues to demonstrate the earnings power of its business model, with stable growth in billings, strong new card acquisitions, and excellent credit performance.
- The company faces heightened regulatory scrutiny and an evolving competitive landscape, which could impact pricing, operations, relationships with partners/merchants, and brand reputation.
- Macroeconomic conditions, including recession risks, inflation, and interest rate changes, pose potential headwinds that could affect the company's ability to grow revenue, manage credit performance, and control expenses.
- American Express is actively investing in its Membership Model, digital capabilities, and global expansion, but must balance these growth initiatives with disciplined expense management to maintain profitability.
- The company's robust capital, funding, and liquidity positions provide flexibility to navigate market volatility and support future business growth, while enabling the return of excess capital to shareholders.
Core Business and Operations:
- American Express is a globally integrated payments company that provides credit and charge cards, merchant acquisition and processing services, network services, travel and lifestyle services, expense management products, and other fee-based services
- Key products and services include credit/charge cards, merchant services, network services, travel and lifestyle services, and expense management solutions
- Serves a diverse customer base of consumers, small businesses, mid-sized companies, and large corporations globally
- Competes with card networks, issuers, acquirers, paper-based transactions, bank transfers, and evolving alternative payment mechanisms
Industry and Market Trends:
- Payments industry continues to undergo dynamic changes driven by evolving technologies, consumer habits, and merchant needs
- Increasing regulatory focus on payments industry operations, pricing, and practices, including interchange fee regulations, network access requirements, and data localization mandates
- Heightened regulatory scrutiny on compliance, sales practices, and consumer protection, leading to increased costs and potential enforcement actions
- Competitive pressures from traditional and non-traditional players, including potential impact of merchant surcharging, steering, and differential acceptance
Recent Events:
- Completed sale of Accertify, Inc., a fraud prevention solutions provider, resulting in a $531 million gain
- Became a Category III bank holding company, subject to heightened capital, liquidity, and prudential requirements
- Ongoing governmental investigations related to historical sales practices for small business customers
Risk Factors:
- Macroeconomic conditions, including recession risks, inflation, interest rate changes, and geopolitical instability
- Ability to grow revenue, manage credit performance, control expenses, and execute strategic initiatives
- Regulatory and legal developments that could impact pricing, operations, relationships with partners/merchants, and brand reputation
- Cybersecurity and data privacy/protection risks, including from increasingly sophisticated cyberattacks
- Changes in the competitive landscape and merchant acceptance/coverage
Legal Matters:
- Defending against various merchant antitrust and other claims related to anti-steering and non-discrimination provisions
- Ongoing governmental investigations into historical sales practices for small business customers
- Challenges related to application of value-added taxes in certain international jurisdictions
Management's Discussion and Analysis:
- Stable growth in billed business, strong new card acquisitions, and excellent credit performance
- Increase in total revenues driven by growth in discount revenue, net card fees, and net interest income
- Provisions for credit losses increased due to higher net write-offs, partially offset by lower reserve builds
- Disciplined expense management, with operating expenses growing at a slower pace than revenue
- Maintained capital ratios within target range and returned $6.3 billion to shareholders through share repurchases and dividends
Earnings calls
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Earnings Report 2025Q1 (2025-04-17)
Key takeaways
- Resilience of Premium Customer Base: American Express's focus on a premium customer base provides a buffer against broader economic downturns, as these customers tend to be less sensitive to fluctuations in consumer confidence and stock market performance.
- Strategic Investments are Key: Management's commitment to long-term strategic investments, particularly in technology and product refreshes, is crucial for maintaining a competitive edge and driving sustainable growth, even during periods of economic uncertainty.
- Expense Flexibility is a Valuable Tool: The company's flexible expense model, particularly in marketing and OpEx, allows it to adapt to changing economic conditions and prioritize investments in high-return areas.
- Millennial and Gen-Z are Critical for Growth: The continued acquisition and engagement of Millennial and Gen-Z customers are vital for future growth, and the company's strategies to cater to this demographic, such as focusing on restaurant experiences, are paying off.
- SMB Technology Ecosystem is a Priority: Building a comprehensive technology ecosystem for SMB customers, through acquisitions like Center and Kabbage, is a strategic priority that can drive retention, acquisition, and potentially organic spending.
Focus of management’s prepared remarks
- Strong Q1 Performance: Revenues up 8% year-over-year (FX adjusted), net income at $2.6 billion, or $3.64 per share, driven by healthy spending from premium customers.
- Customer Base Growth: Added 3.4 million new cards, with Millennials and Gen-Z comprising over 60% of new consumer accounts.
- Spending Trends: Total card member spending grew 6%, with goods and services growing faster than in 2024. T&E growth remained steady, with strong performance in restaurants and lodging.
- Guidance Maintained: Full-year revenue growth guidance of 8% to 10% and EPS of $15 to $15.50 are maintained, incorporating macroeconomic outlook changes.
- Resilient Business Model: Highlights a global premium customer base, diversified revenue mix (75% from spend and fees), and significant expense leverage.
- Four Core Principles: Backing customers, supporting colleagues, disciplined expense management, and strategic long-term investments.
- Billed Business Performance: Total Billed Business was up around 7.5% year-over-year, with Goods and Services spending sustaining the uptick seen in Q4 2024.
- Lending Performance: Loans and card member receivables increased 7% year-over-year, driven by premium products.
- Credit Performance: Delinquency and write-off rates remain below pre-pandemic levels and flat to the prior year.
- Net Card Fees: Net card fees increased 20% FX adjusted, reflecting 27 consecutive quarters of double-digit card fee growth.
- Capital Allocation: CET1 ratio at 10.7%, within the 10% to 11% target range. Returned $1.3 billion of capital to shareholders.
Focus of the analyst Q&A
- Spending Trends and Potential Pull Forward:
- Inquiries about whether spending volumes are being artificially inflated by consumers pulling forward future purchases.
- Concerns about potential volatility or weakness in spending and revenues.
- Impact of Tariffs:
- Questions about which business segments would be most affected by potential tariff increases.
- Inquiries about risk management strategies to mitigate the impact of tariffs.
- Card Refresh and Fee Growth:
- Questions about the ability to continue raising fees in the current environment.
- Focus on the strategy of card refreshes and their impact on fee growth.
- Investment Strategy:
- Focus on where the company sees opportunities for investment, given the current economic environment.
- Questions about capital allocation strategy and whether it will be more aggressive or defensive.
- Unemployment Rate and Spending:
- Concerns about the impact of a rising unemployment rate on consumer spending.
- Questions about the relationship between the stock market, consumer confidence, and spending.
- Millennial and Gen-Z Performance:
- Inquiries about potential issues with the Millennial and Gen-Z cohort, such as student loan repayments.
- Focus on spend per card or account for this cohort.
- SMB Strategy and Technology Investments:
- Questions about the integration of recent acquisitions like Center and Kabbage.
- Focus on how these investments will translate into better organic spend over time.
- Expense Flexibility:
- Questions about the potential for cost optimization if the economic environment worsens.
- Focus on the expense flex in the model as the company continues to invest.
- E-commerce SMB Billed Business:
- Inquiries about the percentage of SMB billed business related to e-commerce businesses.
- Restaurant Spending:
- Questions about enhancing the value proposition in restaurants to win Gen-Z and Millennial share.
- Focus on experiential differentiation beyond rewards to capture the Gen-Z and Millennial base.
Summary
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Financial Performance
American Express reported a strong Q1 2025, with revenues of $17 billion, up 8% year-over-year on an FX-adjusted basis (9% excluding the leap year impact). Net income was $2.6 billion, or $3.64 per share. These results are in line with the full-year guidance. Key indicators like spend, retention, and credit performance remained strong. The company maintained its full-year revenue growth guidance of 8% to 10% and EPS of $15 to $15.50. ROE was 34% in the quarter.
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Revenue Drivers
Revenue growth was driven by strong card member spending, particularly in goods and services, and continued strength in restaurant and lodging within the T&E category. Net card fees increased 20% FX adjusted, reflecting strong demand for premium products and the acquisition of 3.4 million new cards. Millennial and Gen-Z consumers made up over 60% of new consumer accounts. Net interest income increased 11% on an FX-adjusted basis, growing slightly faster than loans and receivables due to increases in net yield.
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Profit Margins and Cost Management
The VCE to revenue ratio was 43% this quarter. Rewards expense grew 16% year-over-year, influenced by changes to the URR model in the previous year. Marketing and OpEx continue to be key sources of expense leverage. The company emphasizes its flexible model, allowing it to adjust expenses based on economic conditions. The company returned $1.3 billion of capital to shareholders, including $0.6 billion in dividends and $0.7 billion in share repurchases, and increased the dividend by 17%.
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Guidance and Outlook
American Express is maintaining its full-year revenue growth guidance of 8% to 10% and EPS of $15 to $15.50. This guidance incorporates a macroeconomic outlook with a peak weighted average unemployment rate of around 5.7%. Management acknowledges increased macroeconomic uncertainty but believes the guidance is appropriate given current trends. They emphasize a commitment to long-term growth and strategic investments.
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Strategic Initiatives
The company is focused on enhancing products and services, supporting colleagues, exercising disciplined expense management, and investing strategically for the long term. Key areas of investment include technology, control management, customer acquisition, and expanding the membership model. The recent acquisition of Center is aimed at strengthening capabilities for SME customers. The company has refreshed over 150 products over the last five years and plans to continue this strategy.
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Management Commentary
Management expressed confidence in the company's resilient and differentiated business model, highlighting its global premium customer base, diversified revenue mix, and expense leverage. They emphasized a commitment to managing the company for long-term growth and strategically investing in key areas. The tone was optimistic, with a focus on navigating potential economic challenges while maintaining a long-term perspective. CEO Steve Squeri stated, "We are operating from a position of strength, and we have a set of principles that guide us." CFO Christophe Le Caillec noted that key business indicators are "consistent with, and in many cases, better than what we saw in 2024."
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Industry and Market Conditions
The company acknowledges increased macroeconomic uncertainty, including potential impacts from tariffs and unemployment. They are closely monitoring these factors and adjusting their models accordingly. Management believes their premium customer base is relatively resilient to economic fluctuations, but they are paying close attention to the potential impact on small businesses. They noted that white-collar unemployment is a key factor to watch.
Comparative analysis
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Benchmarks (as of 2025-05-20)
Financial Select Sector SPDR Fund (XLF)
- Performance Comparison:
- American Express Co. (AXP) has shown mixed performance compared to the Financial Select Sector SPDR Fund (XLF). Over the past month, AXP outperformed XLF with a return of 22.13% compared to 12.46%. However, year-to-date, AXP has underperformed XLF, with returns of -0.19% and 6.88% respectively. Over longer periods (2 and 3 years), AXP has significantly outperformed XLF.
- Risk and Return Analysis:
- The annualized returns show that AXP has outperformed XLF over 2 and 3-year periods. The 2-year annualized return for AXP is 39.75% compared to 27.47% for XLF, and the 3-year annualized return is 24.67% for AXP compared to 16.85% for XLF. However, over the past year, AXP's annualized return of 23.22% is slightly less than XLF's 23.61%.
- AXP has generally exhibited higher annualized volatility compared to XLF. For example, in Q2 2025, AXP's volatility ranged from 51.08% to 62.35%, while XLF's ranged from 28.59% to 40.08%. This indicates that AXP's price experiences larger fluctuations than XLF.
- AXP has experienced larger drawdowns than XLF. The maximum drawdown for AXP was -31.55% on 2022-09-30, while for XLF it was -25.81% on 2022-10-12. This suggests that AXP carries a higher level of risk, as it has historically experienced more significant declines from its peak.
- Risk-Adjusted Performance:
- The Sharpe Ratio, which measures risk-adjusted return, has fluctuated for both AXP and XLF. As of Q2 2025, the Sharpe ratio for XLF (1.18) is higher than that of AXP (0.87), suggesting that XLF currently offers better risk-adjusted returns compared to AXP.
- The beta of AXP has generally been around 1 or slightly above, indicating that it tends to move with the market. As of Q2 2025, the beta for AXP is 1.28, while the beta for XLF is 0.81. This indicates that AXP is currently more sensitive to market movements compared to XLF.
- Overall Assessment:
- AXP has demonstrated strong performance over longer periods (2 and 3 years) but has shown mixed results in the shorter term. While AXP offers higher potential returns, it also exhibits higher volatility and larger drawdowns, indicating a higher risk profile. XLF, on the other hand, provides more stable returns with lower volatility and drawdowns. The Sharpe Ratio suggests that XLF currently offers better risk-adjusted returns. Investors should consider their risk tolerance and investment horizon when choosing between AXP and XLF.
Peers Price History(as of 2025-05-20)
- Performance Comparison:
- American Express Co. (AXP) has shown mixed performance compared to Capital One Financial Corp. (COF) and Visa, Inc. (V). Over the past three years, AXP has outperformed both COF and V, with returns of 93.78% compared to 74.06% and 80.83%, respectively. However, in the shorter term, AXP has underperformed. Year-to-date, AXP's return is -0.19%, while COF and V have returns of 9.97% and 17.07%, respectively. Over a one-year period, AXP's return is 23.22%, while COF and V have returns of 41.04% and 33.9%, respectively. The recent underperformance suggests that AXP has struggled to keep pace with its peers in the current market environment.
- Risk and Return Analysis:
- AXP's annualized returns have been competitive over longer periods but lag in the short term. The three-year annualized return for AXP is 24.67%, which is higher than COF's 20.29% and V's 21.83%. However, the one-year annualized return for AXP is 23.22%, lower than COF's 41.04% and V's 33.9%.
- In terms of annualized volatility, COF generally exhibits the highest volatility, while V consistently shows the lowest. AXP's volatility is generally moderate. For example, in Q1 2025, AXP's volatility was 62.35%, COF's was 74.21%, and V's was 41.32%.
- The maximum drawdown for AXP was -31.55% on 2022-09-30, which is less severe than COF's -50.38% on 2023-05-04 but more severe than V's -28.6% on 2022-09-30. This indicates that AXP's risk profile is moderate compared to its peers.
- Risk-Adjusted Performance:
- Visa, Inc. (V) generally exhibited the highest Sharpe ratios, indicating better risk-adjusted returns compared to American Express Co. (AXP) and Capital One Financial Corp. (COF). AXP's Sharpe ratios were generally higher than COF's, suggesting better risk-adjusted returns than COF.
- The beta values for AXP and COF were generally above 1, indicating that they are more volatile than the market. The beta values for V were generally below 1, indicating that it is less volatile than the market.
- Overall Assessment:
- American Express Co. (AXP) presents a mixed profile when compared to Capital One Financial Corp. (COF) and Visa, Inc. (V). While AXP has shown strong historical performance over the past three years, its recent performance has lagged behind its peers. AXP's risk profile is moderate, with volatility and drawdown figures falling between those of COF and V. Visa, Inc. (V) generally exhibited the highest Sharpe ratios, indicating better risk-adjusted returns compared to American Express Co. (AXP) and Capital One Financial Corp. (COF). The recent trends suggest that AXP may be facing challenges in the current market environment, as evidenced by its underperformance in key metrics such as YTD return and one-year annualized return.
Peers Fundamentals(as of 2025-03-31)
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Market Position and Size:
- American Express (AXP) has a substantial market capitalization of $207,493.44 million, positioning it as a major player in the Finance/Rental/Leasing industry.
- While AXP's market cap is significantly larger than Capital One Financial Corp (COF) at $125,435.04 million, it is considerably smaller than the industry leader, Visa, Inc. (V), which boasts a market cap of $711,363.01 million.
- AXP's revenue of $75,333 million surpasses both COF ($53,869 million) and V ($37,621 million), indicating a strong top-line performance. However, its net income of $10,200 million is greater than COF ($4,795 million) but less than V ($19,642 million), suggesting that AXP's profitability lags behind the industry leader.
- AXP's EBITDA of $21,941 million is also less than V's $26,476 million, further highlighting the difference in profitability between the two companies.
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Profitability and Efficiency:
- AXP's Gross Profit Margin of 60.89% is slightly above the industry average of 60.22%, but significantly lower than Visa's impressive 77.1%.
- Similarly, AXP's EBITDA Margin of 29.13% is above the industry average of 23.29%, but considerably lower than Visa's 70.38%.
- AXP's Net Profit Margin of 13.54% is significantly above the industry average of -14.65%, indicating strong profitability compared to the industry as a whole. However, it is still considerably lower than Visa's 52.21%.
- These figures suggest that while AXP is a profitable company, it is not as efficient as Visa in converting revenue into profit. AXP may have higher operating costs or lower pricing power compared to Visa.
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Financial Health and Stability:
- AXP's Total Debt to Total Equity Ratio is 169.2%, which is greater than Capital One's 65.74% and Visa's 54.59%, but less than the industry average of 703.14%. This indicates that AXP relies more on debt financing compared to its peers.
- AXP's Debt / EBITDA is 2.41, which is greater than Visa's 0.78, but less than the industry average of 30.9. This suggests that AXP's debt is manageable relative to its earnings.
- AXP's Cash Flow / Total Debt is 31.28%, which is less than Capital One's 48.01% and Visa's 176.63%, but greater than the industry average of 14.61%. This indicates that AXP's cash flow coverage of debt is lower than its peers.
- Overall, AXP's financial health is solid, but its higher debt levels compared to Visa raise some concerns.
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Valuation and Market Perception:
- AXP's Enterprise Value To Sales is 2.51, which is greater than Capital One's 1.97, but significantly lower than Visa's 18.5 and the industry average of 9.12.
- AXP's Enterprise Value To EBITDA is 8.62, which is significantly lower than Visa's 26.28 and the industry average of 41.67.
- AXP's Price To Earnings is 20.69, which is greater than Capital One's 16.45 and the industry average of 19.32, but lower than Visa's 37.31.
- AXP's Price to Book Ratio is 6.65, which is greater than Capital One's 1.18 and the industry average of 3.51, but lower than Visa's 19.19.
- AXP's Price To Sales Ratio is 2.76, which is greater than Capital One's 1.4 and the industry average of 2.12, but significantly lower than Visa's 19.25.
- These valuation metrics suggest that AXP is reasonably valued compared to its earnings and sales, but it is not as highly valued as Visa. This may reflect AXP's lower growth prospects or higher risk profile compared to Visa.
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Cash Flow and Capital Management:
- AXP's Net Operating Cash Flow is $13,262 million, which is less than Capital One's $19,816 million and Visa's $21,889 million.
- AXP's Total Capital Expenditure is $1,950 million, which is greater than Capital One's $1,305 million and Visa's $1,381 million.
- AXP's Free Cash Flow is $11,312 million, which is less than Capital One's $18,511 million and Visa's $20,508 million.
- AXP's cash flow generation is solid, but it lags behind its peers in terms of net operating cash flow and free cash flow. Its higher capital expenditure may be contributing to this difference.
- AXP's Cash Conversion Ratio is 0.54, which is greater than Capital One's 0.3, but less than Visa's 0.96 and the industry average of 0.6.
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Growth and Future Prospect:
- AXP's revenue growth has been consistently above the peer average in Year -2 to -1 (17.16% vs 10.8%), Year -3 to -2 (28.08% vs 10.8%), and Year -4 to -3 (26.54% vs 10.8%).
- AXP's EBITDA growth has been consistently above the peer average in Year -2 to -1 (32.3% vs 10.28%), and Year -3 to -2 (27.42% vs 10.28%).
- AXP's EBIT Margin growth has been consistently above the peer average in Year -2 to -1 (16.1% vs -0.73%), and Year -3 to -2 (3.24% vs -0.73%).
- AXP's Free Cash Flow growth has been consistently below the peer average in Year -3 to -2 (3.9% vs 51.62%), and Year -1 to Current (-50.57% vs 51.62%).
- AXP's 3-year CAGR for Sales/Revenue (17.62%) is greater than its 5-year CAGR (9.99%), indicating accelerating revenue growth.
- AXP's 3-year CAGR for EBITDA (21.95%) is greater than its 5-year CAGR (7.4%), indicating accelerating EBITDA growth.
- AXP's 3-year CAGR for EBIT Margin (6.03%) is greater than its 5-year CAGR (-2.33%), indicating accelerating EBIT Margin growth.
- AXP's 3-year CAGR for Free Cash Flow (-7.9%) is less than its 5-year CAGR (56.01%), indicating decelerating Free Cash Flow growth.
- AXP's accelerating revenue and EBITDA growth suggest that it is gaining market share and improving its competitive position. However, the decelerating free cash flow growth raises concerns about AXP's ability to sustain its growth in the long term.
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Potential for Investment:
- AXP presents a mixed investment opportunity. Its strong profitability, efficient use of equity, and robust earnings generation are attractive features.
- However, its weaker cash flow generation, higher debt levels, and lower valuation compared to Visa are potential drawbacks.
- Investors should carefully consider AXP's growth prospects and risk profile before making an investment decision.
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Key Risks and Considerations:
- AXP's higher debt levels compared to its peers raise concerns about its financial flexibility.
- AXP's weaker cash flow generation may limit its ability to invest in future growth opportunities.
- AXP's lower valuation compared to Visa may indicate that the market has lower expectations for its future growth.
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Overall Assessment:
- AXP is a well-established player in the financial services industry with a strong brand and a loyal customer base.
- The company is profitable and efficient, but it lags behind Visa in terms of margins and returns.
- AXP's higher debt levels and weaker cash flow generation are areas of concern.
- Overall, AXP is a solid company with good growth prospects, but it faces stiff competition from larger and more profitable rivals.
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