The EV/EBITDA NTM ratio of American Express Company is significantly lower than the average of its sector (Consumer Finance): 6.88. News Corp is a global, diversified media and information services company focused on creating and distributing authoritative and engaging content and other products and services. Stakeholder of Parent - American Express Co. Related by Industry: Banking and Financial Services, Located in New York-Northern New Jersey-Long Island, NY-NJ-PA Metropolitan Area. Based on the recorded statements, American Express has an Operating Margin of 0.1981%. Source: FactSet, Markets Diary: Data on U.S. Overview page represent trading in all U.S. markets and updates until 8 p.m. See Closing Diaries table for 4 p.m. closing data. At the end of 2021 the company had an Operating Margin of 24.77% . Managers can also increase operating margins by trimming expenses. The Corporate & Other segment covers corporate functions and certain other businesses and operations. What makes it a solid company is its capacity to withstand disruptions. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. First, regarding growth estimates, I believe that American Express will comfortably be able to grow at a rate of 8-10% for the next five years, while sales may begin to teeter off soon after. The management seems to be quite confident in the future growth of the company's earnings as a result of the robust growth strategies they have imposed and an aggressive share buyback program paired with a nice dividend. That is why an upcoming recession could be another prevalent risk factor for American Express. American Express appears significantly undervalued with a large margin of safety to achieve an above-market rate of return. American Express's free cash flow has grown from $12.5 billion in 2017 to $14.5 billion in the TTM, showing much slower growth than their revenue but is significantly higher than their net income. Or is there an opportunity to expand the business' product line in the future? Business leaders track operating margin for insights into the health of the business and to keep costs under control. Factors like these will boost. Understanding the fundamental principles of building solid financial models for American Express is extremely important. Sources: FactSet, Dow Jones, Bonds: Bond quotes are updated in real-time. Lastly, some risk factors present with Amex, such as a hyper-competitive environment and fear of a severe recession which would alter the business's health and pathway into the future. Only post material thats relevant to the topic being discussed. Find out the complete definition of operating profit and how it can help you better understand, measure and increase the profitability of your small business. Our American Express Business Gold Card affords you the flexibility to keep suppliers happy by paying them on time and in full while keeping the cash in your account for longer with its payment terms of up to 54 days. They also plan on continuing this aggressive share buyback program which represents how they can return significant shareholder value. First, they want to continuously expand their market share in the premium consumer space by delivering benefits to their consumers in the form of everyday spending, borrowing, travel, and lifestyle needs. grandviewreasearch.com). In the U.S., cash transactions dropped to 22% in 2020. Be respectful. 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We must also account for its core competencies and if it can withstand disruptions. By doing so, you and %USER_NAME% will not be able to see We are all aware that there is now an extremely high chance of an upcoming recession within the next few months to a few years as a result of the Federal Reserve aggressively raising interest rates to tame inflation, an unstable geopolitical environment as a result of the Russia-Ukraine conflict which contributes to higher inflation in many commodities, and numerous recession indicators flashing such as the yield curve inverting and oil prices nearly doubling. Even more, its Net Debt/EBITDA Ratio is only 1.5x. Revenue has grown from 33.8 billion in 2017 to over 45 billion in the TTM, reflecting a 6.6% CAGR over the past five years. %USER_NAME% was successfully added to your Block List. Likewise, there is an increase in New Year travel plans to 14% compared to 12% in 2021. It has stable and increasing cash levels. . I am not receiving compensation for it (other than from Seeking Alpha). 200 billion in assets and $177 billion in liabilities, $12.5 billion in 2017 to $14.5 billion in the TTM, expect 18-20% growth this year and 10% growth in the long term. Your status will be reviewed by our moderators. We derive many important indicators used in calculating different scores of American Express from analyzing American Express' financial statements. Income. American Express and its main subsidiary, American Express Travel Related Services Company, Inc., are bank holding companies. It is one of the often overlooked dividend-paying stocks that promises secure returns, although it comes with a price. American Express Company ( NYSE: AXP) faces macroeconomic headwinds and expensive competition. A perfect positive correlation (i.e., a correlation coefficient of +1) implies that as American Express moves, either up or down, the other security will move in the same direction. American Express has recently been dragged down along with the rest of the market, but their underlying fiscal state as well as strong business remain robust. American Express notched record cardholder spending in 2022 as consumers increasingly turned to credit cards to grapple with elevated prices. American Express is a global financial institution, operating in about 130 countries, that provides consumers and businesses charge and credit card payment products. I am not receiving compensation for it (other than from Seeking Alpha). The Global Commercial Services segment provides proprietary corporate and small business cards, payment and expense management services, and commercial financing products. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc. Also in this segment, there was a 57% year-over-year spending increase in international markets. A deep dive reveals even more positive results, ones that never make the talk shows but should. Expenses are rising while revenue is flat or falling. As we head towards Q4 we are already on target to exceed this goal," says Creative Director Vaishali Shah. Our American Express Business Gold Card affords you the flexibility to keep suppliers happy by paying them on time and in full while keeping the cash in your account for longer with its payment terms of up to 54 days. Please. This new lounge at Seattle-Tacoma International Airport is triple the size it was previously. Unlock access to over 1000 metrics The latter is easier to control, so my first line of defence would be to do a review of expenses. Revenge travel has exceeded expectations, despite restrictions and skyrocketing fuel costs. Although it has already started in 2015-2018, the frequency of cashless transactions continues to increase. The primary. This measure is expressed in what is known as the correlation coefficient, which ranges between -1 and +1. Its popularity, franchising opportunities, and adherence to digital transformation help it navigate the market landscape. Disclosure: I/we have a beneficial long position in the shares of AXP either through stock ownership, options, or other derivatives. FedEx Express operating results declined due to lower global volumes, partially offset by a 3% increase in revenue per package. These figures mean higher charges for travelers using credit cards. The stock price of American Express Company shows a recent uptrend following a continued decrease. Increased spending may also be attributed to inflation cooling down to 7.7% recently. American Express is trading at reasonable levels relative to their future growth, historical multiples, and quality of their business which I will dive into at a more in-depth level later. This leaves American Express with net debt of just $14 billion, which is very reasonable for the nature of their business. The formula to calculate operating margin relies on two data points: operating income and net sales revenue. After weighing risks and opportunities, we must assess how AXP can sustain its operating capacity. Credit cards are the second most preferred point of sale payment method with 22.4% and may increase further in 2024. Companies with steady or improving operating margins are likely managing their businesses better than companies with operating margins that are shrinking or volatile. Macroaxis helps investors of all levels and skills to maximize the upside of all their holdings and minimize the risk The opposite is true for a car manufacturer. Please note, there is a significant difference between American Express' value and its price as these two are different measures arrived at by different means. If you have an ad-blocker enabled you may be blocked from proceeding. This comes primarily from the growth strategies they have imposed and continuous aggressive share buybacks, which will bolster EPS. It operates through the following segments: Global Consumer Services Group, Global Commercial Services, Global Merchant and Network Services and Corporate & Other. Scaling down on unused office or retail space can reduce the cost of rent or lease payments, especially as companies increasingly shift toremote or hybrid work. business is simply phenomenal. This is 98.73% lower than that of the Consumer Finance sector and 99.01% lower than that of the. Interest rate hikes played a significant role, raising returns on loans and deposits. They aim to do this by expanding their accounts payable expense management as well as designing new innovative financial products. If you don't do this, your portfolio allocation will be skewed against your target asset allocation. I am not receiving compensation for it (other than from Seeking Alpha). This represents how there are a few key competitors in the space, and with the capital-intensive nature of the industry as well as the need to maintain an excellent brand image, it could be difficult for Amex to maintain its market share. From industry expertise to finance tips, weve got your back. The operating profit figure excludes gains or losses from interest, taxes and investments. Additionally, it's important to note how management has confidence in their growth, stating they expect 18-20% growth this year and 10% growth in the long term. More questions must be asked to paint a full picture of a business health. The Global Commercial Services segment provides proprietary corporate and small business cards, payment and expense management services, and commercial financing products. Below are some of American Express' important valuation drivers and their relationship over time. 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