Is Amex Still a Bargain After 32% Share Price Surge and New Partnerships?

• Wondering if American Express is fairly priced right now? You are not alone, as many investors are questioning whether this financial giant still has room to run or is already fully valued.
• American Express shares have been on a strong run, gaining 1.8% over the last week and an impressive 32.1% over the past year. This suggests growing optimism and shifting risk perceptions.
• Some of this momentum aligns with positive headlines about American Express expanding its strategic partnerships and rolling out new customer rewards programs. This has sparked renewed interest from both retail and institutional investors. Recent analyst upgrades have also contributed to the recent surge, as confidence in the company’s growth prospects continues to build.
• When looking at valuation, American Express only scores 1/6 on our standard checks for being undervalued. This suggests caution may be warranted. Here is a breakdown of how analysts typically approach valuation, followed by a method that could provide a better sense of the company’s true worth.

American Express scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: American Express Excess Returns Analysis

The Excess Returns valuation approach measures how much value a company generates above the required cost to its common shareholders. It focuses on return on invested capital and sustainable growth. This method is especially useful in financial sectors such as consumer finance, where book value and return on equity play a crucial role.

For American Express, current estimates indicate a Book Value of $47.05 per share, with a projected Stable Book Value of $50.59 per share, based on estimates from 10 analysts. The company is expected to achieve a Stable Earnings Per Share (EPS) of $18.27, according to the weighted future Return on Equity (ROE) from 13 analysts. The Cost of Equity stands at $4.30 per share, suggesting that American Express is generating an Excess Return of $13.97 per share on its shareholders’ capital. The company’s Average ROE is 36.11%, reflecting an ability to consistently generate returns far above its cost of equity.

Based on the Excess Returns Model, the intrinsic value of American Express is estimated at $308.84 per share. This is notably higher than its current trading price. However, due to the implied 16.0% premium over intrinsic value, the analysis suggests the stock may be overvalued at current levels.

Result: OVERVALUED

Our Excess Returns analysis suggests American Express may be overvalued by 16.0%. Discover 856 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for American Express.

Approach 2: American Express Price vs Earnings

The Price-to-Earnings (PE) ratio is widely used to value profitable companies like American Express because it quickly relates a company’s share price to its earnings. A higher PE can reflect expectations of stronger future growth or lower perceived risk, while a lower PE might signal slower growth or higher uncertainty.

Currently, American Express trades at a PE of 23.7x, which is well above the Consumer Finance industry average of 10.1x and also higher than the average among its peers at 28.5x. This premium indicates investors expect American Express to outperform many competitors, possibly due to its established brand and robust market position. However, raw comparisons to industry or peers can miss key factors, such as the company’s growth prospects, risk profile, profit margins, and market cap.

That is where Simply Wall St’s "Fair Ratio" comes in. This custom metric adjusts for American Express’s specific attributes and operating context, providing a more tailored benchmark for its valuation. For American Express, the Fair Ratio is 21.6x, meaning that, when accounting for its fundamental strengths and potential risks, the company’s current PE is just slightly above what would be considered fair. The narrow gap between the actual and Fair Ratio suggests shares are priced about right relative to company-specific fundamentals.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1405 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your American Express Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. Narratives provide a simple way to connect the story you believe about a company, such as your perspectives on its strategy, threats, and opportunities, to a concrete financial forecast and a resulting fair value.

Rather than judging a stock only by formulas or ratios, a Narrative allows you to blend your qualitative insights with your own numbers, like expected future revenue, earnings, or profit margins. This captures the unique reasons you think American Express will succeed or face challenges.

On Simply Wall St's Community page, Narratives have become a popular, easy-to-use tool for millions of investors to express, refine, and update their investment thesis as news, earnings, or big company changes emerge.

This approach empowers you to compare your fair value versus the current share price instantly, making buy or sell decisions more relevant to your personal view of American Express's future, rather than relying solely on consensus data.

For example, one investor's Narrative might forecast American Express reaching a fair value of $366.63 thanks to booming demand for premium products and international growth. Another may see a fair value of just $230.00, focusing on rising competition and margin pressures.

For American Express, we will make it really easy for you with previews of two leading American Express Narratives:

• 🐂 American Express Bull Case

  Fair Value: $366.63

  Current share price is 2.27% below this fair value

  Projected revenue growth: 11.06%

  • Growth is propelled by younger customers, international expansion, and premium product enhancements targeting global affluence.
  • Investments in technology and integrated B2B platforms are expected to boost retention, efficiency, and diversified earnings.
  • Risks include digital disruption, competition, and higher structural costs, but analysts see high future earnings and premium valuation as justified.
• 🐻 American Express Bear Case

  Fair Value: $338.24

  Current share price is 5.91% above this fair value

  Projected revenue growth: 10.55%

  • Success is driven by premium cardmember focus, innovation for younger demographics, and stable international growth trends.
  • Strong credit quality and disciplined capital strategy underpin margin expansion and resilience through investment cycles.
  • Major risks include competition from new payment platforms, higher retention costs, and continued dependence on a mature US market for growth.

Do you think there's more to the story for American Express? Head over to our Community to see what others are saying!

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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