American Express (AXP) Stock Looks Cheap On Fair Value But Full On Earnings
American Express stock has more than doubled over the past three years, yet the latest intrinsic value work using the Excess Returns model suggests the shares still trade at a discount, while the broader valuation checks paint a less generous picture. For investors, that mix raises questions about how much of American Express’s earnings power and recent execution is already reflected in the current price.
- Over the last three years, American Express has returned about 110.5%, which puts extra focus on whether the current valuation still leaves room for attractive long term returns.
- Recent earnings strength, growing cardmember engagement and ongoing investment in AI and digital payments can support the intrinsic value case, while higher spending on growth, integration of new partnerships and acquisitions may pressure profitability and make that value harder to realise.
- American Express scores just 2 out of 6 on the broader valuation checks, which leans more toward the stock being priced on the rich side than a clear bargain.
The issue now is whether American Express’s current share price already reflects most of that intrinsic value estimate or whether the discount is meaningful enough to interest new investors.
Is American Express Still Cheap on Excess Returns?
The Excess Returns model looks at how much profit American Express can generate above its cost of equity and then values those surplus returns over time. For American Express, the model leans heavily on a strong return profile based on analyst expectations.
The inputs assume book value of $50.79 per share, stable EPS of $21.48 and a cost of equity of $4.82 per share. This translates into excess return of $16.65 per share on an average return on equity of 36.43%. That level of profitability, together with a stable book value estimate of $58.96 per share, supports an intrinsic value of about $417.79 per share. Against the recent share price, this implies American Express screens around 19.5% undervalued.
The recent Q2 2026 earnings beat and raised full year revenue guidance help explain why the model still assigns value to American Express’s ability to earn well above its equity cost, despite higher spending and new investments such as TheFork acquisition.
On this Excess Returns view, American Express stock appears undervalued relative to the earnings power implied by analyst forecasts.
Our Excess Returns analysis suggests American Express is undervalued by 19.5%. Track this in your watchlist or portfolio, or discover 55 more high quality undervalued stocks.
Is American Express Fairly Priced on Earnings?
The P/E ratio is a useful way to compare what you are paying for each dollar of American Express earnings against similar companies. Right now, American Express trades on a P/E of about 20.1x.
That sits very close to both the peer average of 20.4x and the modelled fair P/E of 19.8x, which reflects its profitability profile, scale in payments and risks typical of the Consumer Finance space. American Express also trades at a clear premium to the broader Consumer Finance industry average P/E of 8.9x, which is common for companies with strong brands and cardholder franchises. The small gap between the current multiple and the fair ratio suggests the stock is pricing in a balanced view of its earnings power rather than a clear discount or excessive optimism.
On the P/E approach, American Express shares appear roughly fairly valued compared with what the model and peers would suggest.
See what the numbers say about this price — find out in our valuation breakdown.
The American Express Narrative: What Would Justify Today's Price?
Simply Wall St Narratives for American Express act as the bridge between the valuation gap above and the assumptions that might justify it. They spell out which paths for American Express' growth, margins and earnings would need to hold for the stock to look meaningfully more expensive or cheaper than today’s price, and each one treats fair value as a thesis about the business that can be tracked over time rather than a one off snapshot.
Community views on American Express sit quite far apart, with some investors seeing a premium franchise that still has room to run while others focus on valuation stretch and return hurdles.
Bull case: 10% undervalued
"Sustained momentum in acquiring younger (Millennial and Gen Z) cardholders, with these groups showing strong spend growth and lower delinquency rates compared to industry averages, suggests a successful strategy in capturing the next generation of affluent consumers…"
Read the full Bull Case to see why American Express could be undervalued
Bear case: 12% overvalued
"The current Dividend Yield ratio is below its 7-8 Year average, which means the company may be overvalued as income investors accept a lower yield than usual at today’s price…"
Read the full Bear Case to see why American Express could be overvalued
Do you think there's more to the story for American Express? Head over to our Community to see what others are saying!
The Bottom Line
American Express looks undervalued on the Excess Returns intrinsic value work, while the market multiple view points closer to a stock that is now priced about right. The tension between those two signals sits largely in the assumptions about how long American Express can sustain returns above its equity cost compared with what peers currently trade on.
With broader valuation checks scoring weakly, the key question is whether that intrinsic value discount reflects a genuine opportunity or simply higher risks around spending, partnerships and execution. The crux for investors is how confident you are that American Express can keep turning its franchise strength into high returns on equity over time.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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