American Express Company (AXP)

Conclusion

American Express is a payments company that issues credit and charge cards and runs merchant acquiring, processing and network services across the United States, Europe, Asia Pacific, Latin America and other regions. At 324.31 USD per share on 2026-11-09, the market capitalisation is 217.47 billion USD and the enterprise value is 234.22 billion USD.

The verdict is fair. The fair value band runs from 311.09 to 466.63 USD with a midpoint of 388.86 USD, giving a margin of safety of 19.9% at the current price. The trailing P/E of 17.7 is below its ten-year median of 18.7, and EV/EBITDA of 8.7 is below its median of 13.4, while P/FCF of 15.6 is above its median of 11.2. The DCF gives 472.17 USD per share at a discount rate of 10.3%, and the fair value from historical multiples is 305.55 USD. The reverse DCF implies growth of 5.5% a year, against revenue growth of 16.0% and free cash flow per share growth of 35.1% over five years.

The case rests on a return on invested capital of 35.2% against a WACC of 9.9%, an operating margin of 27.6% against its ten-year median of 17.6%, and free cash flow conversion of 113.5% on a trailing basis. The share count has fallen by 2.9% a year over five years. The weakest numbers are interest coverage of 2.98, which the scorecard flags as a risk, a P/FCF premium of 39.3% to its history, and a three-year free cash flow per share change of -3.5% a year.

Financial health

Financial strength is grey, because American Express is a financial business and debt is part of its trade, so the scorecard does not colour it. Net debt to EBITDA of 0.62 and a current ratio of 191.09 are reported, but the interest coverage of 2.98 is flagged as a risk. Debt to equity is 1.67. The Altman Z-score is 2.17, which sits in the grey zone. The Altman model was designed for manufacturers, so it is only a rough guide for this company. The Ohlson model does not apply to a financial business, so no insolvency probability is given.

Earnings quality

Earnings quality is green, supported by a Beneish M-score of -2.56, which is read as unlikely to indicate manipulation, and by free cash flow conversion of 113.5% on a trailing basis and 172.5% over five years. The accrual ratio is -2.7%, which points to cash earnings running ahead of reported profit. Stock-based compensation is 0.74% of revenue, and free cash flow after it is 13.28 billion USD. The share count fell by 2.9% a year over five years, which reflects buybacks. The Piotroski score is 6 of 9. American Express beat earnings estimates in 7 of the last 8 quarters, with an average surprise of 5.3%. Current-year estimates were revised up by 4.0% over 90 days, while next-year estimates moved by 0.3%.

Profitability

Profitability is green. The operating margin of 27.6% is well above its ten-year median of 17.6%, and the net margin of 14.3% is slightly above its median of 13.6%. The gross margin of 85.2% is in line with its median of 85.3%. Operating margin has been fairly stable, with a five-year measure of 17.7%. ROIC of 35.2% against a WACC of 9.9% gives a ROIC minus WACC value of 25.3%, which the scorecard assesses as creating value. Return on equity is 34.2%, but the DuPont split shows that leverage plays a large part: a net margin of 13.5%, an asset turnover of 0.27 and an equity multiplier of 9.0x.

Growth

Growth is green. Revenue has grown at a compound rate of 13.1% over three years, 16.0% over five years and 8.9% over ten years. Earnings per share grew at 15.9% over three years, 32.0% over five years and 11.7% over ten years. Free cash flow per share fell by 3.5% a year over three years, but rose by 35.1% a year over five years and 9.1% a year over ten years. Revenue grew in 9 of the last 10 years. Analysts expect earnings per share to grow by 13.4% next year, a figure the scorecard assesses as good.

Valuation

Valuation is yellow, because the verdict is fair and the scorecard treats that as neutral. The P/E of 17.7 is 5.3% below its ten-year median of 18.7. EV/EBITDA of 8.7 is 35.0% below its median of 13.4. P/FCF of 15.6 is 39.3% above its median of 11.2, P/S of 2.5 is 6.1% above its median of 2.4, and P/B of 6.1 is 18.1% above its median of 5.1. The DCF gives 472.17 USD per share at a discount rate of 10.3%, with a long-term growth rate of 2.5%. The terminal value accounts for 54.3% of that figure. The fair value band is 311.09 to 466.63 USD, with a midpoint of 388.86 USD and a margin of safety of 19.9%. The fair value from historical multiples is 305.55 USD. The reverse DCF implies 5.5% growth, which is 10.5% below the five-year revenue growth rate and 29.7% below the five-year free cash flow per share growth rate. The dividend yield is 1.15%, and dividends take 18.0% of free cash flow.

Risks

Interest coverage of 2.98 is the weakest balance-sheet number, because a fall in earnings would leave less room to meet interest payments. The P/FCF premium of 39.3% means the price depends on cash flow holding up. The three-year drop of 3.5% a year in free cash flow per share would weaken the growth case if it continued. The DCF relies heavily on the terminal value, which accounts for 54.3%, so small changes in the discount or growth rate would move the result. The current ratio of 191.09 is not a useful liquidity measure for a card lender. The cost of debt of 10.9% and the debt maturity schedule are not available, and neither is revenue by segment. This analysis does not cover them.