Exploring American Express (AXP) Valuation After Its Recent Uptick in Investor Attention

If you have been following American Express (AXP) lately, you have probably noticed the stock’s recent moves catching investor attention. There is no single event driving the price right now. When shares show a shift without a clear catalyst, it often leaves people wondering whether this momentum is the sign of something bigger. It could be the market re-evaluating the company’s prospects or simply reflecting shifting sentiment in the financial sector. Either way, this kind of activity rarely goes unnoticed by anyone thinking about their next move. Taking a step back, American Express has quietly delivered strong returns over the past year, with a 29% gain that stands out among its peers. Over the past 3 years, the stock is up well above twofold, and even this year, momentum remains positive. Recent months have seen both revenue and net income grow at healthy rates, suggesting that underlying business performance is providing some support for the current valuation. So, after this steady climb, is the market underestimating American Express’s future growth or is today’s price a fair reflection of all that potential?

Most Popular Narrative: 4.9% Overvalued

According to the most widely discussed narrative, American Express is currently trading above its estimated fair value, placing it in the "overvalued" category by a modest margin. The narrative weighs key company initiatives and future projections to arrive at this conclusion.

Continuous enhancements to the Membership Model are fueling the earnings power of the core business and reinforcing confidence in delivering strong bottom-line growth. New Card Acquisitions: American Express has been driving strong new card acquisitions, with 3.3 million new cards in Q2 2024 and 3.4 million in Q1 2024.

Want to peek under the hood of this premium valuation? The numbers behind this narrative involve aggressive growth forecasts and ambitious profitability targets. Full details unveil the bold assumptions that support this fair value, including customer additions, product refreshes, and more. Ready to see what sets these projections apart from the status quo?

Result: Fair Value of $308.19 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, challenges in international operations and unexpected regulatory actions could weaken the company’s growth story and lead to a market reassessment.

Find out about the key risks to this American Express narrative.

Another View: SWS DCF Model Challenges the Premium

While many see American Express as overvalued, our DCF model suggests the shares trade above a calculated fair value. This challenges the premium the market is willing to pay. Which approach might have the sharper insight?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out American Express for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own American Express Narrative

Curious to see things from your own perspective or believe there’s more beneath the surface? You can examine the facts and shape your unique take in just a few minutes. Do it your way.

A great starting point for your American Express research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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