Why American Express (AXP) Stock Could Move Higher

NEW YORK (TheStreet) -- American Express Co. (AXP)  could see higher revenue in the years ahead as expanded merchant relationships are convincing customers to swipe their AmEx more often. That, along with an improving economy, technological innovations, and a robust policy of returning cash to shareholders, could send AmEx shares higher in the coming year, Barron's reports.

While its peers have seen their card revenue fall by about 2% a year, on average, since 2010, AmEx revenue has grown at a 6% annual rate in that period, the company says.

For several investors and analysts, the promise of accelerated spending growth is reason enough to buy the stock, according to Barron's.

 

Shares of American Express are slightly lower at $87.27 in mid afternoon trade.

TheStreet Ratings team rates AMERICAN EXPRESS CO as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate AMERICAN EXPRESS CO (AXP) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, growth in earnings per share, increase in net income and solid stock price performance. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • AXP's revenue growth has slightly outpaced the industry average of 0.4%. Since the same quarter one year prior, revenues slightly increased by 4.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • AMERICAN EXPRESS CO has improved earnings per share by 12.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, AMERICAN EXPRESS CO increased its bottom line by earning $4.88 versus $3.87 in the prior year. This year, the market expects an improvement in earnings ($5.51 versus $4.88).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Consumer Finance industry average. The net income increased by 8.8% when compared to the same quarter one year prior, going from $1,405.00 million to $1,529.00 million.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Consumer Finance industry and the overall market, AMERICAN EXPRESS CO's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • You can view the full analysis from the report here: AXP Ratings Report
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