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Why American Express Has Premium Valuations

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Premium valuations

On an NTM (next 12-month) basis, American Express (AXP) has a PB (price-to-book) ratio of 3.92x. The average for its peers is 2.16x. Green Dot (GDOT), Capital One Financial (COF), and Synchrony Financial (SYF) have PB ratios on an NTM basis of 3.74x, 0.88x, and 1.88x, respectively.

American Express has reported strong 3Q17 results, which can be considered a valid reason for its higher valuations. Strong 3Q17 results show that the company has been working hard to recover from the Costco (COST) breakup.

Positive view on valuations

American Express (AXP) could witness an increase in valuations in the coming months since it has sealed the deal with Marriott International (MAR) for its credit card program. AXP declared a quarterly dividend of $0.35 per share on November 28, 2017, which will be paid on February 9, 2018.

Stephen Squeri, American Express’s new chief executive officer on February 1, 2018, has a positive view of the company’s long-term perspective, which could also improve the company’s valuations.

American Express has a PB ratio on an LTM (last 12-month) basis of 4.07x. Peers (XLF) Synchrony Financial (SYF), Green Dot (GDOT), and Capital One Financial (COF) have PB ratios of 2.04x, 4.19x, and 0.93x, respectively, on an LTM basis.

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