Should You Reconsider Amex After a 19% Rally and New Digital Partnerships in 2025?

Thinking about what to do with American Express stock? You are not alone. In recent weeks, American Express has become quite the topic among investors, and with good reason. The stock has kept up a steady climb, closing most recently at $355.22 and showing off an impressive 19.0% gain year-to-date. If you zoom out even more, the numbers get even harder to ignore, with a 31.8% jump in the past year and a powerful 150.8% return across the last three years. That kind of performance gets people talking, but it also invites tougher questions about what comes next and whether the current price matches the true value of the company.

So why the flurry of optimism? Much of the recent buzz links back to American Express’s continued push into new digital partnerships and its fresh travel benefits, which have heightened its appeal to younger cardholders and higher-spending members alike. The company has also announced several upgrades to its membership programs. While these moves have not dramatically changed earnings forecasts, they have signaled to the market that American Express is keen on evolving its brand, which may help explain the stock’s momentum and investors’ willingness to pay up.

Of course, momentum is only part of the story. When it comes to valuation, American Express scores a 1 on our 6-point undervaluation scale, meaning the market currently sees it as undervalued by just one commonly used metric. Is this enough reason to buy, hold, or sell? In the next section, we will pull apart some of the main valuation approaches, and hint at a perspective beyond traditional metrics that could give you a much fuller picture before you decide what’s next for your portfolio.

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 model focuses on how much profit American Express generates over and above its cost of equity, based on its capacity to continue compounding shareholder value. In essence, it calculates the company’s return on invested capital, subtracts the cost of that capital, and projects the results into the future to estimate an intrinsic value per share.

For American Express, the average future Return on Equity is estimated at a robust 36.07%. The stable book value of the company is $50.59 per share, and the expected stable earnings per share (EPS) are $18.25. Both figures are derived from weighted forecasts by a consensus of 10 to 13 analysts. With a cost of equity at just $4.26 per share, the company’s excess return is $13.99 per share, indicating a business model that consistently exceeds the hurdle rate required by investors.

According to this analysis, the intrinsic value of American Express stock is calculated at $312.20, compared to the current share price of $355.22. This represents an implied overvaluation of 13.8 percent, suggesting the stock is trading ahead of what fundamentals alone justify at the moment.

Result: OVERVALUED

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

Our Excess Returns analysis suggests American Express may be overvalued by 13.8%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: American Express Price vs Earnings

For companies like American Express that are consistently profitable, the price-to-earnings (PE) ratio is a widely recognized tool for valuation. It tells investors how much they are paying for each dollar of the company’s earnings, making it a useful shorthand for determining if a stock is attractively priced. However, what should be considered a "normal" or fair PE ratio is shaped by growth expectations and risk. Companies with stronger future growth, higher profitability, or lower perceived risks often command a higher multiple, while those with slower growth or more instability trade at lower multiples.

Right now, American Express trades at a PE ratio of 23.5x. This stands well above the consumer finance industry average of 10.1x but still a bit below the peer average of 29.2x. To help cut through the noise of industry-wide and peer comparisons, we use the “Fair Ratio,” a metric that goes beyond basic benchmarks. The Fair Ratio combines fundamental attributes like earnings growth, profit margin, risk factors, market cap, and industry context to estimate what a reasonable PE should look like for American Express specifically.

In this case, the Fair Ratio is 21.5x, only slightly below the company’s current PE of 23.5x. Because this difference is modest, it suggests that the stock’s valuation is about in line with where it should be once all the underlying factors are considered. The Fair Ratio approach is especially valuable as it adjusts for growth potential and risk, avoiding the pitfalls of using blunt, one-size-fits-all comparisons.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 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. A Narrative is essentially your story or perspective about a company, connecting what you believe about its outlook to specific forecasts, such as future revenue, earnings, and profit margins, and ultimately to what you think is a fair value for the stock.

Unlike static metrics, Narratives help you bring together the big picture and the numbers, showing exactly how your beliefs influence your own price target for American Express. On Simply Wall St's Community page, millions of investors are already using Narratives as an easy, accessible tool to clarify whether they think a stock is undervalued or overvalued. This approach makes it much simpler to decide whether to buy, hold, or sell by directly comparing your Fair Value to the market price.

What makes Narratives especially powerful is that your assumptions and valuations automatically update when new company news or financial results are published, helping you stay agile and informed. For example, some investors set their Narrative with a Fair Value as high as $366.63, based on international growth and digital payment gains. Others are much more cautious, seeing Fair Value as low as $230.00 if spending decelerates and margins shrink. This means you can see a range of perspectives in real time and decide for yourself exactly how much American Express is worth, using your own story and current data together.

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

🐂 American Express Bull Case

Fair Value: $366.63

24.5% undervalued vs. current price

Revenue Growth: 11.1%

• Strong growth is projected from expansion among younger and more affluent customers, especially internationally, and from premium product enhancements.
• Strategic technology investments and integration of B2B ecosystems are expected to support diversified, resilient earnings and industry-leading profitability.
• Risks include disruption from digital wallets, fintech competitors, rising customer acquisition costs, funding disadvantages, and potential regulatory headwinds. Bullish analysts believe upside outweighs these risks if optimistic forecasts play out.

🐻 American Express Bear Case

Fair Value: $338.24

5.0% overvalued vs. current price

Revenue Growth: 10.5%

• Focus remains on premium products and younger demographics, supporting stable earnings and retention, with growth driven by new card launches and international expansion.
• Strong credit quality and disciplined capital allocation underpin margin expansion and ongoing investments. However, analysts see risk in saturated markets and competitive pressure.
• Key threats include increased competition, changing consumer payment preferences, rising engagement costs, slower than expected international diversification, and disruption from digital alternatives that could put long-term pressure on profitability and valuation.

Do you think there's more to the story for American Express? Create your own Narrative to let the Community know!

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com