Each week we run a DCF (Discounted Cash Flow) model on a company from our watchlist. This week’s pick: American Express Company (AXP).
Profile
American Express is one of the world’s leading integrated payments companies, providing charge and credit card products, travel-related services, and global merchant processing. Its powerful brand, affluent customer base, and closed-loop network create a durable competitive advantage.
With a focus on premium cardholders and disciplined risk management, AXP consistently delivers high returns on equity and steady growth in fee-based revenue. The company’s digital and merchant services ecosystem continues to expand, while rising interest income from lending portfolios adds another profit lever.
DCF Analysis
Inputs
- Discount Rate: 10%
- Terminal Growth Rate: 3%
- WACC: 10%
Forecasted Free Cash Flows (in billions USD)
| Year | FCF | PV (10%) |
|---|---|---|
| 2025 | 13.0 | 11.8 |
| 2026 | 13.9 | 11.5 |
| 2027 | 14.8 | 11.1 |
| 2028 | 15.7 | 10.7 |
| 2029 | 16.6 | 10.3 |
Total Present Value of FCFs = $55.4B
Terminal Value Calculation
Using perpetuity growth model with 2029 FCF = $16.6B:
TV = (16.6 × 1.03) ÷ (0.10 − 0.03) = $244.3B
Present Value of Terminal Value = $151.7B
Enterprise Value
Enterprise Value = 55.4B + 151.7B = $207.1B
Net Debt
- Cash & Equivalents: $40.6B
- Total Debt: $51.1B
- Net Debt = $10.5B
Equity Value & Per-Share Value
Equity Value = 207.1B − 10.5B = $196.6B
Shares Outstanding: ~703 million
Intrinsic Value per Share ≈ $280
Conclusion
- DCF Value: $280
- Current Price: ~$358
- Margin of Safety: –28%
American Express continues to generate strong free cash flow and maintain a premium brand position in global payments. However, based on conservative growth assumptions, the stock currently trades above intrinsic value. While not a deep-value opportunity, AXP’s stable profitability, disciplined underwriting, and growing digital ecosystem make it a high-quality compounding franchise worth monitoring for pullbacks.
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