Key takeaways
View moreAmerican Express demonstrates strong financial performance significantly above industry averages, with valuation metrics (EV/EBITDA of 8.62x vs. 41.67x industry average) suggesting material undervaluation relative to peers. The company's premium customer base resilience, strong growth initiatives, and successful digital transformation strategy, combined with its conservative financial leverage and robust cash flow generation, indicate that the current market price doesn't fully reflect the company's intrinsic value and growth potential.
- American Express demonstrates robust financial health with consistent revenue growth, reporting $18.95 billion in revenue for the quarter ending March 31, 2025.
- The company's profitability significantly outperforms industry averages, with a net profit margin of 13.54% compared to the industry average of -14.65%.
- Strategic investments in technology and SMB technology ecosystems, as highlighted in the earnings call, are crucial for maintaining a competitive edge and driving sustainable growth.
- Macroeconomic conditions, including recession risks and potential impacts from tariffs, pose significant threats that could affect revenue growth and credit performance, as noted in SEC filings.
- American Express is maintaining its full-year revenue growth guidance of 8% to 10% and EPS of $15 to $15.50, demonstrating confidence in its resilient business model.
- The company's Total Debt to Total Equity Ratio of 169.2 is significantly lower than the industry average of 703.14, indicating lower financial leverage.
- AXP has outperformed XLF and V over the past three years, with total returns of 141.72% versus 74.63% and 80.72% respectively, but has shown mixed performance more recently.
- The addition of 3.4 million new cards, with Millennials and Gen-Z comprising over 60% of new consumer accounts, highlights the company's success in attracting younger demographics.
- The Enterprise Value to EBITDA ratio of 8.62, compared to the industry average of 41.67, suggests that American Express may be undervalued compared to its industry peers.
Evaluation summary
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Company Overview:
- American Express Co. (AXP) operates as a globally integrated payments company, offering credit and charge cards, merchant acquisition and processing services, network services, travel and lifestyle services, and expense management products. Key products include credit/charge cards, merchant services, network services, travel and lifestyle services, and expense management solutions. The company serves consumers, small businesses, mid-sized companies, and large corporations globally.
- AXP's business is divided into four main segments: United States Consumer Services (USCS), Commercial Services (CS), International Card Services (ICS), and Global Merchant and Network Services (GMNS). The company generates revenue through discount revenue, net card fees, and net interest income.
- For comparative analysis, the company is benchmarked against the Financial Select Sector SPDR Fund (XLF) and its peers include Capital One Financial Corp. (COF) and Visa, Inc. (V).
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Financial Performance:
- American Express has demonstrated consistent revenue growth. For the quarter ending March 31, 2025, the company reported revenue of $18.95 billion, compared to $19.21 billion for the quarter ending December 31, 2024, $18.77 billion for the quarter ending September 30, 2024, and $18.40 billion for the quarter ending June 30, 2024.
- Net income for the quarter ending March 31, 2025, was $2.57 billion, compared to $2.15 billion, $2.49 billion, and $2.99 billion for the previous three quarters, respectively.
- The company's net profit margin for the quarter ending March 31, 2025, was 13.54%, compared to 11.21%, 13.26%, and 16.26% for the previous three quarters. This is significantly higher than the industry average of -14.65%.
- American Express exhibits strong profitability with a Return on Average Assets of 3.7%, Return on Average Total Equity of 34.02%, and Return on Average Total Capital of 18.56% for the quarter ending March 31, 2025. These figures significantly outperform the industry averages of 0.38%, 3.29%, and 6.93%, respectively.
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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, is not explicitly provided, but the balance sheet data indicates a strong liquidity position supported by substantial cash and short-term investments.
- Net operating cash flow was $4.76 billion for the quarter ending March 31, 2025, compared to $5.78 billion, -$1.81 billion, and $4.53 billion for the previous three quarters.
- Free cash flow to equity was $4.33 billion for the quarter ending March 31, 2025, compared to $5.28 billion, -$2.27 billion, and $3.97 billion for the previous three quarters, indicating a healthy but fluctuating cash generation capability. The free cash flow margin for the quarter ending March 31, 2025, was 0.23.
- Capital expenditure was $430 million for the quarter ending March 31, 2025.
- The company paid cash dividends of $509 million for the quarter ending March 31, 2025, and repurchased shares, returning $1.3 billion of capital to shareholders in total.
- The Total Debt to Total Equity Ratio was 169.2 for the quarter ending March 31, 2025, which is significantly lower than the industry average of 703.14, indicating lower financial leverage. The Debt / EBITDA ratio was 2.41.
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Growth Opportunities:
- American Express is focused on enhancing its products and services, supporting colleagues, exercising disciplined expense management, and investing strategically for the long term.
- The company is investing in technology, control management, customer acquisition, and expanding the membership model.
- Recent acquisitions, such as Center, are 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.
- 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.
- 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.
- 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.
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Recent Developments and Market Sentiment:
- American Express reported strong Q1 2025 results, with revenues up 8% year-over-year (FX adjusted) and net income at $2.6 billion, or $3.64 per share, driven by healthy spending from premium customers.
- The company added 3.4 million new cards, with Millennials and Gen-Z comprising over 60% of new consumer accounts.
- 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.
- Full-year revenue growth guidance of 8% to 10% and EPS of $15 to $15.50 are maintained, incorporating macroeconomic outlook changes.
- Analysts have raised questions about spending trends, the impact of potential tariffs, and the company's investment strategy.
- Management expressed confidence in the company's resilient and differentiated business model, highlighting its global premium customer base, diversified revenue mix, and expense leverage.
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Risks and Threats:
- Macroeconomic conditions, including recession risks, inflation, interest rate changes, and geopolitical instability, pose potential headwinds that could affect the company's ability to grow revenue, manage credit performance, and control expenses.
- Regulatory and legal developments could impact pricing, operations, relationships with partners/merchants, and brand reputation.
- Cybersecurity and data privacy/protection risks, including from increasingly sophisticated cyberattacks, remain a significant concern.
- The company faces competitive pressures from traditional and non-traditional players, including the potential impact of merchant surcharging, steering, and differential acceptance.
- Ongoing governmental investigations into historical sales practices for small business customers represent a legal and reputational risk.
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Valuation Analysis:
- The Enterprise Value to EBITDA ratio for the quarter ending March 31, 2025, was 8.62, compared to 10.07, 9.23, and 7.85 for the previous three quarters. The industry average is 41.67.
- The Enterprise Value to Sales ratio for the quarter ending March 31, 2025, was 2.51, compared to 2.96, 2.74, and 2.34 for the previous three quarters. The industry average is 9.12.
- These valuation metrics suggest that American Express may be undervalued compared to its industry peers.
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Price Performance:
- The stock price has shown volatility in recent months. From May 5, 2025, to July 2, 2025, the stock price increased from $277.33 to $324.79.
- American Express Co. (AXP) has shown mixed performance compared to the Financial Select Sector SPDR Fund (XLF). Over the past three years, AXP has significantly outperformed XLF, with total returns of 141.72% versus 74.63%. However, in shorter time frames, such as Year-To-Date and 6 Months, AXP has underperformed XLF by 0.19% and 1.27% respectively. In the last week and month, AXP has significantly outperformed XLF by 2.96% and 6.12% respectively.
- Compared to Visa (V), AXP has outperformed over the past three years but has underperformed YTD.
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Future 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.
- Analysts are focused on potential impacts from tariffs, unemployment, and spending trends, which could influence the company's 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.
- The company's financial leverage is lower than the industry average, indicating a conservative capital structure.
- Increased macroeconomic uncertainty, regulatory scrutiny, and cybersecurity risks pose ongoing challenges that require proactive risk management strategies.
- The company's valuation metrics suggest that it may be undervalued compared to its industry peers.
- Key factors for future performance include managing macroeconomic risks, maintaining disciplined expense management, and continuing to invest in strategic growth initiatives.
- Areas requiring further monitoring include spending trends, the impact of potential tariffs, and the performance of the Millennial and Gen-Z cohort.
- Overall, American Express presents a compelling investment profile with strong fundamentals and growth prospects, but requires careful monitoring of macroeconomic conditions and competitive pressures. The company's strong financial position and strategic focus position it well for future success, but investors should be aware of the potential risks and challenges.
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 2025-07-02)
Financial Select Sector SPDR Fund (XLF)
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Performance Comparison:
- American Express Co. (AXP) has shown mixed performance compared to the Financial Select Sector SPDR Fund (XLF). Over the past three years, AXP has significantly outperformed XLF, with total returns of 141.72% versus 74.63%. However, in shorter time frames, such as Year-To-Date and 6 Months, AXP has underperformed XLF by 0.19% and 1.27% respectively. In the last week and month, AXP has significantly outperformed XLF by 2.96% and 6.12% respectively.
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Risk and Return Analysis:
- AXP has provided higher annualized returns over the 1, 2, and 3-year periods. For example, the 3-year annualized return for AXP is 34.21% compared to 20.42% for XLF.
- AXP has generally exhibited higher annualized volatility compared to XLF. For example, in Q2 2025, AXP's volatility ranged from 62.35% to 22.52%, while XLF's volatility ranged from 40.08% to 13.6%. This indicates that AXP's returns are more dispersed and it is riskier than XLF.
- AXP experienced a maximum drawdown of -31.55% on 2022-09-30, while XLF experienced a maximum drawdown of -25.81% on 2022-10-12. This suggests that AXP is more prone to significant declines from previous peaks.
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Risk-Adjusted Performance:
- The Sharpe Ratio for AXP has fluctuated, and generally XLF has exhibited higher Sharpe ratios than AXP, indicating better risk-adjusted returns. As of Q3 2025, the Sharpe ratios for both AXP and XLF are relatively stable, with AXP at 1.19 - 1.21 and XLF at 1.32 - 1.38.
- AXP's beta has generally been around 1, indicating that it moves in line with the market. As of Q3 2025, AXP has a beta of 1.31 and XLF has a beta of 0.82. This indicates that AXP is currently more sensitive to market movements than XLF.
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Overall Assessment:
- AXP has demonstrated strong historical performance over the past few years, outperforming XLF in annualized returns. However, it exhibits higher volatility and larger drawdowns, indicating a higher risk profile. While AXP has shown periods of outperformance, XLF generally offers better risk-adjusted returns as indicated by its higher Sharpe Ratio.
- Recent trends show that AXP is more sensitive to market movements than XLF, as indicated by its higher beta. Investors should consider their risk tolerance and investment horizon when choosing between AXP and XLF.
Peers Price History(as of 2025-07-02)
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Performance Comparison:
- American Express (AXP) has shown mixed performance compared to Visa (V). Over the past three years, AXP has outperformed V, with total returns of 141.72% versus 80.72%. However, YTD, AXP is underperforming V, with returns of 9.73% versus 13.04%. In the short term (1 Week and 1 Month), AXP has outperformed V, but over the 6-month period, AXP has underperformed V.
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Risk and Return Analysis:
- American Express (AXP) has provided higher annualized returns over the 2-year and 3-year periods compared to Visa (V). The annualized returns for AXP over 3 years is 34.21% compared to 21.81% for Visa.
- The annualized volatility for AXP has generally been moderate, with fluctuations over the past few years. COF has shown higher volatility, while V has been relatively stable.
- 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 slightly worse than V's -28.6% on 2022-09-30. This suggests that AXP carries a moderate level of risk compared to its peers.
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Risk-Adjusted Performance:
- The Sharpe Ratio for American Express (AXP) has generally been lower than that of Visa (V), indicating that V has offered better risk-adjusted returns.
- The Beta value for AXP has generally been above 1, indicating that it is more volatile than the market. In contrast, Visa (V) has a Beta below 1, suggesting it is less sensitive to market movements.
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Overall Assessment:
- American Express (AXP) has demonstrated strong historical performance over the past few years but has shown mixed results more recently. While AXP has provided competitive returns, its risk-adjusted performance, as indicated by the Sharpe Ratio and Beta, is generally less favorable than that of Visa (V). Capital One Financial Corp (COF) appears to be the riskiest of the three, with higher volatility and drawdowns.
- Investors should consider Visa (V) if they are looking for a more stable, less market-sensitive investment.
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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