founded: 1851, NYSE code: AXP, homepage: ir.americanexpress.com

Overview
American Express is arguably the most well known, iconic symbol of the payment industry. American Express Company operates one of the World’s widest payment processing networks and provides jobs to approximately 32,000 US and 33,000 non-US employees.

In 2006 the company derived about 60% of total net income from its U.S. card services operations, 22% from its international card commercial services and remaining 18% was contributed by its global merchant services.

Analysis of December 2006 financial results:

• Market Cap: Depending on the daily prices of the company’s stock the total market capitalization is around US$70 billion over 1.24 billion of issued shares
• Shareholders Equity: US$10.51 billion making the stock’s book value approx. US$8.50 per share (1.25% growth on FY2005)
• Earnings per share: US$2.99 making the average EPS growth in last 3 years about 9.4%
• Return on Equity: 35.3%, averaging about 26.2%pa in last 5 years
• Return on total Assets: 2.90%, averaging about 2.3%pa in last 5 years
• Balance Sheet: Total assets US$127.85 bln versus total liabilities of $117.34bln (TA/TL ratio of 1.09)

GROWTH STOCK:

• Conservative forecast of average EPS growth in next 10 years: 10%
• Share price in 10 years time: about US$140 (EPS in year 10 based on fore casted yearly EPS growth times average P/E)
• Total shareholders return in 10 years times: US$149 (share price of US$140 plus US$9 of the 10 years worth of dividends if the current payout ratio of about 18% persists)
• Rate of Return in next 10 years based on mid December 2007 price of US$51.75 per share: 11.2%

Pros and cons:
+++ Very well established business with great tradition and market leadership within its industry
+++ Excellent ROE and ROA ratios
— Rather small increases in book value over recent years
— Current credit market crisis and uncertainties about future consumer spending levels yet to reveal its full impact on the short term results

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This entry was posted on Wednesday, December 19th, 2007 at 9:46 pm and is filed under US Stock. You can follow any responses to this entry through the RSS feed. You can leave a response, or trackback from your own site.