American Express has delivered a very strong 115.7% return over the past three years, yet its current checks send a mixed valuation message, with the intrinsic value estimate from the Excess Returns model pointing to upside while the broader scorecard is far less generous.

• Over the past three years, American Express stock has gained 115.7%, putting recent weakness into context and raising the bar for what counts as good value today.
• Recent partnerships in travel and B2B payments, along with ongoing AI investments, can support expectations for future cash generation, while slower consumer spending or higher credit costs remain key risks for how much investors are willing to pay for that growth.
• American Express currently passes only 1 out of 6 valuation checks, which leans more toward a fully priced stock than a clear bargain, even though the intrinsic value model suggests it may be around 16.1% undervalued.

The issue now is whether American Express's share price already reflects its recent progress and partnerships, or if the intrinsic value estimate still leaves a meaningful margin of safety for new investors.

Is American Express Still Cheap on Excess Returns?

The Excess Returns model evaluates how much value American Express creates above the return required by its shareholders and then capitalizes that stream. For American Express, the inputs are quite robust, with an average Return on Equity of 36.00% applied to a Book Value of $49.85 per share and a Stable Book Value estimate of $58.46 per share. After charging a Cost of Equity of $4.80 per share, this produces an Excess Return of $16.25 per share, linked to a Stable EPS estimate of $21.05 per share.

On these assumptions, the Excess Returns model points to an intrinsic value of about $406 per share, which is roughly 16.1% above the current share price and indicates the stock screens as undervalued. News such as American Express joining the x402 Foundation to help shape AI-driven payments helps explain why the model still sees value in a business that is investing in its core payments franchise.

Overall, the Excess Returns workup suggests American Express stock currently looks undervalued relative to the earnings power implied by its return on equity and book value base.

Our Excess Returns analysis suggests American Express is undervalued by 16.1%. Track this in your watchlist or portfolio, or discover 38 more high quality undervalued stocks.

Where Does American Express Sit on Earnings?

The P/E ratio suits American Express because earnings remain a key yardstick for a mature, profitable payments and lending business. Right now, American Express trades at about 21.0x earnings, slightly above the consumer finance industry average of 8.4x and just above the peer group average of 20.2x. This suggests investors are willing to pay a premium versus the wider sector, but only a small one versus closer peers.

The tailored fair P/E ratio for American Express is 19.8x, which is very close to the current multiple. This indicates the stock is priced near what this model views as reasonable given its size, margins and risk profile. The gap to the fair ratio is modest, so this P/E reading does not flag American Express stock as either clearly cheap or clearly expensive.

On balance, American Express looks roughly fairly valued on its P/E multiple.

The American Express Narrative: What Would Justify Today's Price?

Simply Wall St Narratives for American Express act as the link between the mixed valuation signals above and the concrete expectations that sit behind them, spelling out which paths for American Express' growth, margins and earnings would need to play out for the stock to be worth clearly more or clearly less than today's price on the Community page. Instead of stopping at a single model output, these Narratives unpack the future that figure relies on so you can watch in real time whether that story continues to line up with how the business is actually performing.

Community views on American Express sit far apart, with some investors focused on premium fee power and others watching valuation and return metrics more closely.

Bull case: 9% 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, which should drive future billed business and support earnings stability..."

Bear case: 14% overvalued

"However, overall, American Express seems to be overvalued (at least a little) at the moment..."

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

For American Express, the Excess Returns intrinsic value estimate points to meaningful upside, while the P/E view suggests the stock is priced around where comparable companies trade. That split, combined with a low broader valuation score, implies the apparent discount may rely heavily on how durable current returns on equity and cash generation prove to be. The crux for investors is whether American Express can keep funding growth in areas like travel, B2B payments and AI without eroding those returns, or whether slower spending and higher credit costs end up justifying a more cautious multiple.

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.