Over the past six months, American Express’s stock price fell to $342.15. Shareholders have lost 8.4% of their capital, which is disappointing considering the S&P 500 has climbed by 6.1%. This was partly driven by its softer quarterly results and may have investors wondering how to approach the situation.
Given the weaker price action, is now a good time to buy AXP? Find out in our full research report, it’s free.
Why Are We Positive on AXP?
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. Skyrocketing Revenue Shows Strong Momentum
A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.
Luckily, American Express’s revenue grew at an impressive 15.5% compounded annual growth rate over the last five years. Its growth beat the average financials company and shows its offerings resonate with customers.
2. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
American Express’s EPS grew at 21.4% compounded annual growth rate over the last five years, higher than its 15.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
3. Stellar ROE Showcases Lucrative Growth Opportunities
Return on equity, or ROE, quantifies financial firm 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 33%, 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 think American Express is a great business. With the recent decline, the stock trades at 18.9× forward P/E (or $342.15 per share). Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
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