American Express (AXP) is up about 5% in the past month. Rewind a full six months and you will find the stock jumped an impressive 42% in that span. Go back a full year and AXP looks even more intriguing. The stock is up an impressive 67%.
Though most people assume AXP strictly makes money through credit card transactions, the company does plenty more. As an example, AXP recently launched a checking account service. AXP also provides travel-related services, payment services, and additional financial services.
Is AXP a Buy after its recent ascent? Let’s find out.
AXP Points of Note
AXP has a forward P/E ratio of 21.86. This is an indication that the stock might be a bit overpriced at its current trading level. Indeed, AXP is trading at a premium as it is within less than a dollar of its 52-week high.
AXP's latest financials were criticized by analysts as the company missed revenue expectations. Making matters worse is the fact that the company's financial figures throughout the period were not exactly eye-popping. Though AXP is evolving with the introduction of checking accounts and installment pay features for those who fly, there are some legitimate concerns with this stock.
AXP's revenue dipped 12% on a year over year basis. However, consumer spending is likely to increase in the months ahead, ultimately helping AXP and other payment processors. It is also interesting to note that AXP's consumer spending outside of entertainment and travel jumped 11% in Europe in the past year. This is a considerable feat considering the context.
The question is whether AXP's products outside of its credit cards can gain traction with the masses. The company provides a litany of other financial products and services including working capital arrangements, business loans, personal loans, checking accounts, and more. In particular, there are high hopes for AXP's worldwide business lending program that might eventually become a powerful growth driver.
AXP POWR Ratings
AXP has an overall grade of B, translating into a Buy grade in our POWR Ratings system. AXP has B grades in the Momentum and Sentiment components of the POWR Ratings. If you are curious as to how AXP grades out in the rest of the components (Growth, Value, Stability, and Quality), you can find out by clicking here.
Of the 52 publicly traded companies in the Consumer Financial Services industry, AXP slots in at number 14. You can find other top stocks in this industry by clicking here.
AXP According to Analysts
Analysts do not believe AXP will skyrocket to new heights. The average target price for the stock is $154.69, indicating a potential 2% downside. The lowest target price for the stock is $120 while the highest target price is $197. However, it is particularly interesting to note AXP's average price target has increased slightly more than $49 in the past 39 weeks. Five analysts rate the stock a Strong Buy and nine rate it a Buy.
Is It Wise to Buy AXP Now?
While AXP appears a bit overvalued, the stock is still worth buying. AXP is rated a Buy in our POWR Ratings service with mostly solid component grades. Plus, analysts forecast a 424% rise in earnings this quarter.
AXP shares rose $0.05 (+0.03%) in premarket trading Friday. Year-to-date, AXP has gained 40.07%, versus a 14.65% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.
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