American Express (AXP)

Global payments company American Express (NYSE:AXP) reported revenue ahead of Wall Street’s expectations in Q3 CY2025, with sales up 11.8% year on year to $13.94 billion. Its GAAP profit of $4.14 per share was 3.6% above analysts’ consensus estimates.

Company Overview

Recognizable by its iconic green logo and the slogan "Don't leave home without it," American Express (NYSE:AXP) is a global payments company that issues credit and charge cards, processes merchant transactions, and offers travel and lifestyle benefits to consumers and businesses.

Credit card companies facilitate electronic payments and extend revolving credit to consumers. Growth comes from increasing digital payment adoption, cross-border transaction growth, and value-added services for cardholders and merchants. Challenges include regulatory scrutiny of fees and practices, competition from alternative payment methods, and potential credit losses during economic downturns.

American Express competes with global payment networks like Visa (NYSE:V), Mastercard (NYSE:MA), and Discover (NYSE:DFS), as well as with major card-issuing banks such as JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C), and Bank of America (NYSE:BAC). In certain markets, it also faces competition from regional players like China UnionPay and JCB.

A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, American Express grew its revenue at a solid 12.1% compounded annual growth rate. Its growth surpassed the average financials company and shows its offerings resonate with customers, a great starting point for our analysis.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. American Express’s annualized revenue growth of 9.7% over the last two years is below its five-year trend, but we still think the results were respectable. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, American Express reported year-on-year revenue growth of 11.8%, and its $13.94 billion of revenue exceeded Wall Street’s estimates by 3.7%.

The total number of transactions and loan originations flowing through a firm is a key driver of top-line growth. Taken together, this volume is the lifeblood of financial services companies, whether traditional banks or fintech disruptors.

American Express’s volumes have grown at an annual rate of 11.3% over the last five years, a step above the broader financials industry but slower than its total revenue. When analyzing American Express’s volumes over the last two years, we can see that growth decelerated to 5.7% annually.

American Express’s volumes punched in at $479.2 billion this quarter, beating analysts’ expectations by 1.5%. This print was 8.7% higher than the same quarter last year.

Revenue growth is one major determinant of business quality, and the efficiency of operations is another. For Credit Card companies, we look at pre-tax profit rather than the operating margin that defines sectors such as consumer, tech, and industrials.

The pre-tax profit margin includes interest because it's central to how financial institutions generate revenue and manage costs. Tax considerations are excluded since they represent government policy rather than operational performance, giving investors a clearer view of business fundamentals.

Over the last four years, American Express’s pre-tax profit margin has risen by 9.3 percentage points, going from 34.9% to 25.6%. Luckily, it seems the company has recently taken steps to address its expense base as its pre-tax profit margin expanded by 3 percentage points on a two-year basis.

American Express’s pre-tax profit margin came in at 27.4% this quarter. This result was 1.7 percentage points better than the same quarter last year.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

American Express’s EPS grew at an astounding 29.8% compounded annual growth rate over the last five years, higher than its 12.1% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For American Express, its two-year annual EPS growth of 18.2% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q3, American Express reported EPS of $4.14, up from $3.49 in the same quarter last year. This print beat analysts’ estimates by 3.6%. Over the next 12 months, Wall Street expects American Express’s full-year EPS of $14.90 to grow 11.9%.

The balance sheet drives profitability for financial firms since earnings flow from managing diverse assets and liabilities across multiple business lines. As such, valuations for these companies concentrate on capital strength and sustainable equity accumulation potential across their varied operations.

This explains why tangible book value per share (TBVPS) is a premier metric for the sector. TBVPS provides concrete per-share net worth that investors can trust when evaluating companies with complex, multi-faceted business models. EPS can become murky due to the complexity of multiple revenue streams, acquisition impacts, or accounting flexibility across different financial services, and book value resists financial engineering manipulation.

American Express’s TBVPS grew at a solid 11.6% annual clip over the last five years. The last two years show a similar trajectory as TBVPS grew by 12% annually from $37.48 to $47.05 per share.

Return on equity (ROE) measures how effectively banks generate profit from each dollar of shareholder equity - a critical funding source. High-ROE institutions typically compound shareholder wealth faster over time through retained earnings, share repurchases, and dividend payments.

Over the last five years, American Express has averaged an ROE of 32.9%, exceptional for a company operating in a sector where the average shakes out around 10% and those putting up 25%+ are greatly admired. This shows American Express has a strong competitive moat.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, American Express has averaged a Tier 1 capital ratio of 10.6%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

It was encouraging to see American Express beat analysts’ revenue expectations this quarter. We were also happy its transaction volumes outperformed Wall Street’s estimates. Overall, we think this was a solid quarter with some key areas of upside. The stock remained flat at $326.30 immediately following the results.

Updated: December 4, 2025 at 11:39 PM EST

When considering an investment in American Express, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

American Express is an amazing business ranking highly on our list. First of all, the company’s revenue growth was solid over the last five years. On top of that, its stellar ROE suggests it has been a well-run company historically, and its astounding EPS growth over the last five years shows its profits are trickling down to shareholders.

American Express’s P/E ratio based on the next 12 months is 22.1x. Looking across the spectrum of financials businesses, American Express’s fundamentals clearly illustrate it’s a special business. We like the stock at this price.

Wall Street analysts have a consensus one-year price target of $351.87 on the company (compared to the current share price of $371.27).