American Express

Methodology

American Express' closed-loop card network and focus on affluent customers creates more predictable earnings than traditional banks, though credit cycles and consumer spending still impact results. The company's spending-based revenue model provides less credit risk exposure than pure lending businesses. This calculation works reasonably for American Express during stable economic periods, though recession risks and credit losses can create meaningful volatility.

Methodology

American Express' PEG ratio typically ranges from 1.0-1.8, reflecting moderate valuations for a premium payments network with exposure to affluent consumer spending. The company's membership rewards ecosystem and merchant acceptance expansion provide growth drivers, though competition from Visa/Mastercard and fintechs creates headwinds. Compare to other card networks and consumer finance companies to gauge whether Amex's premium positioning justifies its multiples.

Methodology

American Express' dividend yield (around 1.0-1.5%) combined with substantial buybacks makes PEGY relevant for assessing total capital returns. The company's strong free cash flow generation from card fees and interest income supports aggressive share repurchases alongside modest dividends. PEGY better captures the shareholder return proposition for American Express, where management's capital deployment discipline enhances returns beyond operational performance alone.