American Express Rebounding With Credit

NEW YORK ( TheStreet) -- Whether you're reading this before or after American Express ( AXP) announces their latest quarterly earnings, you'll find this company a compelling investment.

They're certainly not impeccable. AXP announced on Oct. 1 that it would have to pay $112 million to settle charges by the government that it had engaged in deceptive practices. Although I'm glad they were held responsible, they are by no means alone over the past two decades in those kinds of business practices.

This multifaceted financial company has cleaned up its act and sharpened its focus on what they do best. AXP doesn't only provide charge and credit payment card products and travel-related services to customers worldwide.

Their product portfolio also consists of expense management products and services, consumer and business travel services and stored value products, including traveler's cheques and other prepaid financial products.

They make money with network services like merchant acquisition and processing, servicing and settlement, as well as point-of-sale, marketing and information products and services for merchants.

They also ring the register with fee services comprising market and trend analyses and related consulting services, fraud prevention services and the design of customer loyalty and rewards programs. AXP is an innovative company that's always looking for a new approach to expand earnings.

That's why they announced last week a partnership arrangement with none other than Walmart ( WMT). Hopefully management will give us more details on the conference call Wednesday evening.

So far the gist is that the companies are providing a prepaid debit card called Bluebird which then can be used as an alternative to more conventional bank credit cards. IF WMT signs off on it we should anticipate a smooth beginning and plenty of additional revenue for AXP.

The chart below illustrates the seamless correlation between the upside one-year movement of AXP's stock price and their impressive price-to-earnings-to-growth ratio.

AXP Chart AXP data by YCharts

As of the end of their last quarter their PEG ratio (5-year expected) was a modest 1.23 and their forward price-to-earnings ratio stood at 12.51. Analysts' consensus on AXP's 12-month upside stock price potential of around $62.57 would translate to a 5% higher share price from current levels.

The company has been paying shareholders an 80-cent-per-year dividend. At a share price of $59.21 that translates to a meager 1.35% yield. Not enough to motivate most growth-with-income investors. They can afford to raise the dividend since the payout ratio is a very modest 13% of earnings.

When it comes to analysts' expectations for the earnings announcement, the consensus estimates are for earnings per share to come in at $1.09 and revenue to be around $7.93 billion, according to First Call. Other key financial statistics to be listening for involve the percentage of customers with loans 30 days or more past due. That number rose to 1.3% in September, up from 1.2% during the previous month.

American Express' operating margin last quarter looked good at nearly 24% and their profit margin was above 17%. A big number for its future growth and financial stability will be the Total Cash and Operating Cash Flow, which last quarter stood at $22.78 billion and $13.24 billion respectively.

Besides AXP, another company reporting later Wednesday will be e-commerce giant eBay ( EBAY). The success and quarterly results from both these companies will give us plenty of hints as to the overall economic health in America and around the world.

At the time of publication, the author held no positions in any of the companies mentioned in this article.

Jim Cramer and Stephanie Link actively manage a real money portfolio for his charitable trust -- enjoy advance notice of every trade, full access to the portfolio, and deep coverage of the latest economic events and market movements.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

If you liked this article you might like

Be Careful With American Express -- The Stock, Not the Credit Card

Be Careful With American Express -- The Stock, Not the Credit Card

Why Millennials Love Warren Buffett

Why Millennials Love Warren Buffett

These 5 Dow Stocks Are Already in Correction in 2018

These 5 Dow Stocks Are Already in Correction in 2018

This Black History Month on Wall Street

This Black History Month on Wall Street

Managed Care Stocks Thrashed on Amazon News but Could Be Buying Opportunity

Managed Care Stocks Thrashed on Amazon News but Could Be Buying Opportunity