Intrinsic value of American Express - AXP

Previous Close

$87.39

  Intrinsic Value

$39.64

stock screener

  Rating & Target

str. sell

-55%

  Value-price divergence*

-36%

Previous close

$87.39

 
Intrinsic value

$39.64

 
Up/down potential

-55%

 
Rating

str. sell

 
Value-price divergence*

-36%

Our model is not good at valuating stocks of financial companies, such as AXP.

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of AXP stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 79.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -1.73
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  32,717
  33,371
  34,139
  35,016
  36,001
  37,093
  38,290
  39,594
  41,006
  42,527
  44,159
  45,905
  47,768
  49,751
  51,860
  54,097
  56,467
  58,977
  61,631
  64,435
  67,395
  70,519
  73,814
  77,286
  80,945
  84,799
  88,856
  93,127
  97,620
  102,348
  107,321
Variable operating expenses, $m
 
  25,423
  26,001
  26,662
  27,404
  28,225
  29,127
  30,109
  31,172
  32,318
  33,547
  34,569
  35,972
  37,465
  39,053
  40,738
  42,523
  44,413
  46,411
  48,523
  50,752
  53,105
  55,586
  58,201
  60,956
  63,858
  66,913
  70,129
  73,513
  77,074
  80,818
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  24,621
  25,423
  26,001
  26,662
  27,404
  28,225
  29,127
  30,109
  31,172
  32,318
  33,547
  34,569
  35,972
  37,465
  39,053
  40,738
  42,523
  44,413
  46,411
  48,523
  50,752
  53,105
  55,586
  58,201
  60,956
  63,858
  66,913
  70,129
  73,513
  77,074
  80,818
Operating income, $m
  8,096
  7,948
  8,138
  8,354
  8,598
  8,867
  9,163
  9,485
  9,834
  10,209
  10,612
  11,336
  11,796
  12,286
  12,807
  13,359
  13,944
  14,564
  15,219
  15,912
  16,643
  17,414
  18,228
  19,086
  19,989
  20,941
  21,943
  22,997
  24,107
  25,275
  26,503
EBITDA, $m
  9,191
  8,762
  8,963
  9,193
  9,452
  9,739
  10,053
  10,395
  10,766
  11,165
  11,594
  12,052
  12,541
  13,062
  13,616
  14,203
  14,825
  15,484
  16,181
  16,917
  17,694
  18,515
  19,380
  20,291
  21,252
  22,264
  23,329
  24,450
  25,630
  26,871
  28,177
Interest expense (income), $m
  1,700
  3,775
  3,870
  3,984
  4,114
  4,259
  4,421
  4,598
  4,791
  5,000
  5,225
  5,467
  5,725
  6,001
  6,294
  6,606
  6,937
  7,288
  7,659
  8,052
  8,467
  8,905
  9,367
  9,855
  10,369
  10,910
  11,481
  12,081
  12,713
  13,378
  14,078
Earnings before tax, $m
  8,096
  4,173
  4,268
  4,371
  4,484
  4,608
  4,742
  4,887
  5,043
  5,209
  5,387
  5,869
  6,071
  6,285
  6,512
  6,753
  7,007
  7,276
  7,560
  7,860
  8,176
  8,509
  8,861
  9,231
  9,620
  10,030
  10,462
  10,916
  11,394
  11,896
  12,425
Tax expense, $m
  2,688
  1,127
  1,152
  1,180
  1,211
  1,244
  1,280
  1,319
  1,361
  1,406
  1,455
  1,585
  1,639
  1,697
  1,758
  1,823
  1,892
  1,965
  2,041
  2,122
  2,208
  2,298
  2,392
  2,492
  2,597
  2,708
  2,825
  2,947
  3,076
  3,212
  3,355
Net income, $m
  5,408
  3,046
  3,115
  3,191
  3,273
  3,364
  3,462
  3,567
  3,681
  3,803
  3,933
  4,285
  4,432
  4,588
  4,754
  4,930
  5,115
  5,312
  5,519
  5,738
  5,968
  6,212
  6,468
  6,738
  7,023
  7,322
  7,637
  7,969
  8,318
  8,684
  9,070

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3,278
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  158,893
  161,997
  165,723
  169,982
  174,763
  180,062
  185,875
  192,205
  199,058
  206,440
  214,363
  222,838
  231,882
  241,512
  251,746
  262,605
  274,113
  286,295
  299,178
  312,789
  327,161
  342,326
  358,319
  375,176
  392,937
  411,644
  431,340
  452,071
  473,885
  496,836
  520,975
Adjusted assets (=assets-cash), $m
  155,615
  161,997
  165,723
  169,982
  174,763
  180,062
  185,875
  192,205
  199,058
  206,440
  214,363
  222,838
  231,882
  241,512
  251,746
  262,605
  274,113
  286,295
  299,178
  312,789
  327,161
  342,326
  358,319
  375,176
  392,937
  411,644
  431,340
  452,071
  473,885
  496,836
  520,975
Revenue / Adjusted assets
  0.210
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
Average production assets, $m
  5,103
  5,206
  5,326
  5,463
  5,616
  5,786
  5,973
  6,177
  6,397
  6,634
  6,889
  7,161
  7,452
  7,761
  8,090
  8,439
  8,809
  9,200
  9,614
  10,052
  10,514
  11,001
  11,515
  12,057
  12,627
  13,229
  13,862
  14,528
  15,229
  15,966
  16,742
Working capital, $m
  0
  16,686
  17,069
  17,508
  18,001
  18,546
  19,145
  19,797
  20,503
  21,263
  22,079
  22,952
  23,884
  24,876
  25,930
  27,048
  28,234
  29,488
  30,815
  32,217
  33,698
  35,260
  36,907
  38,643
  40,473
  42,399
  44,428
  46,563
  48,810
  51,174
  53,660
Total debt, $m
  107,868
  110,575
  113,820
  117,530
  121,695
  126,310
  131,373
  136,887
  142,855
  149,285
  156,186
  163,568
  171,446
  179,833
  188,747
  198,205
  208,229
  218,839
  230,060
  241,916
  254,434
  267,642
  281,572
  296,254
  311,724
  328,018
  345,173
  363,229
  382,230
  402,220
  423,246
Total liabilities, $m
  138,392
  141,099
  144,344
  148,054
  152,219
  156,834
  161,897
  167,411
  173,379
  179,809
  186,710
  194,092
  201,970
  210,357
  219,271
  228,729
  238,753
  249,363
  260,584
  272,440
  284,958
  298,166
  312,096
  326,778
  342,248
  358,542
  375,697
  393,753
  412,754
  432,744
  453,770
Total equity, $m
  20,501
  20,898
  21,378
  21,928
  22,544
  23,228
  23,978
  24,794
  25,678
  26,631
  27,653
  28,746
  29,913
  31,155
  32,475
  33,876
  35,361
  36,932
  38,594
  40,350
  42,204
  44,160
  46,223
  48,398
  50,689
  53,102
  55,643
  58,317
  61,131
  64,092
  67,206
Total liabilities and equity, $m
  158,893
  161,997
  165,722
  169,982
  174,763
  180,062
  185,875
  192,205
  199,057
  206,440
  214,363
  222,838
  231,883
  241,512
  251,746
  262,605
  274,114
  286,295
  299,178
  312,790
  327,162
  342,326
  358,319
  375,176
  392,937
  411,644
  431,340
  452,070
  473,885
  496,836
  520,976
Debt-to-equity ratio
  5.262
  5.290
  5.320
  5.360
  5.400
  5.440
  5.480
  5.520
  5.560
  5.610
  5.650
  5.690
  5.730
  5.770
  5.810
  5.850
  5.890
  5.930
  5.960
  6.000
  6.030
  6.060
  6.090
  6.120
  6.150
  6.180
  6.200
  6.230
  6.250
  6.280
  6.300
Adjusted equity ratio
  0.132
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  5,408
  3,046
  3,115
  3,191
  3,273
  3,364
  3,462
  3,567
  3,681
  3,803
  3,933
  4,285
  4,432
  4,588
  4,754
  4,930
  5,115
  5,312
  5,519
  5,738
  5,968
  6,212
  6,468
  6,738
  7,023
  7,322
  7,637
  7,969
  8,318
  8,684
  9,070
Depreciation, amort., depletion, $m
  1,095
  813
  825
  839
  854
  871
  890
  910
  932
  956
  982
  716
  745
  776
  809
  844
  881
  920
  961
  1,005
  1,051
  1,100
  1,151
  1,206
  1,263
  1,323
  1,386
  1,453
  1,523
  1,597
  1,674
Funds from operations, $m
  8,797
  3,859
  3,941
  4,030
  4,128
  4,235
  4,352
  4,478
  4,613
  4,759
  4,914
  5,001
  5,177
  5,364
  5,563
  5,773
  5,996
  6,232
  6,480
  6,743
  7,020
  7,312
  7,620
  7,944
  8,285
  8,645
  9,023
  9,422
  9,840
  10,281
  10,744
Change in working capital, $m
  573
  327
  384
  439
  493
  546
  599
  652
  706
  760
  816
  873
  932
  992
  1,054
  1,119
  1,185
  1,255
  1,327
  1,402
  1,480
  1,562
  1,647
  1,736
  1,829
  1,927
  2,029
  2,135
  2,247
  2,364
  2,486
Cash from operations, $m
  8,224
  3,532
  3,557
  3,591
  3,635
  3,689
  3,753
  3,826
  3,908
  3,998
  4,098
  4,128
  4,246
  4,373
  4,509
  4,655
  4,811
  4,977
  5,153
  5,341
  5,540
  5,750
  5,972
  6,208
  6,456
  6,718
  6,995
  7,286
  7,594
  7,917
  8,258
Maintenance CAPEX, $m
  0
  -510
  -521
  -533
  -546
  -562
  -579
  -597
  -618
  -640
  -663
  -689
  -716
  -745
  -776
  -809
  -844
  -881
  -920
  -961
  -1,005
  -1,051
  -1,100
  -1,151
  -1,206
  -1,263
  -1,323
  -1,386
  -1,453
  -1,523
  -1,597
New CAPEX, $m
  -1,375
  -103
  -120
  -137
  -154
  -170
  -187
  -203
  -220
  -237
  -255
  -272
  -291
  -309
  -329
  -349
  -370
  -391
  -414
  -437
  -462
  -487
  -514
  -542
  -571
  -601
  -633
  -666
  -701
  -738
  -776
Cash from investing activities, $m
  1,868
  -613
  -641
  -670
  -700
  -732
  -766
  -800
  -838
  -877
  -918
  -961
  -1,007
  -1,054
  -1,105
  -1,158
  -1,214
  -1,272
  -1,334
  -1,398
  -1,467
  -1,538
  -1,614
  -1,693
  -1,777
  -1,864
  -1,956
  -2,052
  -2,154
  -2,261
  -2,373
Free cash flow, $m
  10,092
  2,919
  2,917
  2,921
  2,935
  2,957
  2,988
  3,025
  3,070
  3,122
  3,180
  3,167
  3,239
  3,318
  3,404
  3,497
  3,597
  3,705
  3,819
  3,942
  4,072
  4,211
  4,358
  4,514
  4,680
  4,854
  5,039
  5,234
  5,440
  5,657
  5,886
Issuance/(repayment) of debt, $m
  -136
  2,707
  3,245
  3,710
  4,165
  4,615
  5,063
  5,514
  5,968
  6,430
  6,901
  7,382
  7,877
  8,387
  8,914
  9,459
  10,024
  10,610
  11,221
  11,856
  12,518
  13,209
  13,930
  14,683
  15,470
  16,293
  17,155
  18,057
  19,001
  19,990
  21,026
Issuance/(repurchase) of shares, $m
  -4,254
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -6,325
  2,707
  3,245
  3,710
  4,165
  4,615
  5,063
  5,514
  5,968
  6,430
  6,901
  7,382
  7,877
  8,387
  8,914
  9,459
  10,024
  10,610
  11,221
  11,856
  12,518
  13,209
  13,930
  14,683
  15,470
  16,293
  17,155
  18,057
  19,001
  19,990
  21,026
Total cash flow (excl. dividends), $m
  3,653
  5,626
  6,162
  6,631
  7,100
  7,572
  8,051
  8,539
  9,038
  9,551
  10,081
  10,549
  11,116
  11,705
  12,318
  12,956
  13,621
  14,315
  15,040
  15,798
  16,590
  17,420
  18,288
  19,197
  20,150
  21,148
  22,194
  23,291
  24,441
  25,646
  26,911
Retained Cash Flow (-), $m
  172
  -397
  -481
  -549
  -617
  -683
  -750
  -817
  -884
  -952
  -1,022
  -1,093
  -1,167
  -1,242
  -1,320
  -1,401
  -1,485
  -1,571
  -1,662
  -1,756
  -1,854
  -1,956
  -2,063
  -2,175
  -2,291
  -2,413
  -2,541
  -2,674
  -2,814
  -2,961
  -3,114
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  5,229
  5,681
  6,082
  6,483
  6,889
  7,301
  7,722
  8,154
  8,599
  9,059
  9,456
  9,950
  10,463
  10,998
  11,555
  12,136
  12,743
  13,378
  14,042
  14,736
  15,463
  16,225
  17,023
  17,858
  18,735
  19,653
  20,616
  21,626
  22,686
  23,797
Discount rate, %
 
  12.60
  13.23
  13.89
  14.59
  15.32
  16.08
  16.89
  17.73
  18.62
  19.55
  20.52
  21.55
  22.63
  23.76
  24.95
  26.19
  27.50
  28.88
  30.32
  31.84
  33.43
  35.10
  36.86
  38.70
  40.64
  42.67
  44.80
  47.04
  49.39
  51.86
PV of cash for distribution, $m
 
  4,644
  4,431
  4,117
  3,761
  3,378
  2,984
  2,591
  2,210
  1,850
  1,519
  1,213
  957
  738
  556
  409
  293
  205
  139
  92
  59
  36
  22
  12
  7
  4
  2
  1
  0
  0
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

American Express Company, together with its subsidiaries, provides charge and credit payment card products and travel-related services to consumers and businesses worldwide. It operates through four segments: U.S. Consumer Services, International Consumer and Network Services, Global Commercial Services, and Global Merchant Services. The company’s products and services include charge and credit card products, as well as other payment and financing products; network services; expense management products and services; travel-related services; and stored value/prepaid products. Its products and services also comprise merchant acquisition and processing, servicing and settlement, merchant financing, point-of-sale marketing, and information products and services for merchants; and fraud prevention services, as well as the design and operation of customer loyalty programs. The company sells its products and services to consumers, small businesses, mid-sized companies, and large corporations through online applications, direct mail, in-house teams, third-party vendors, and direct response advertising. American Express Company was founded in 1850 and is headquartered in New York, New York.

FINANCIAL RATIOS  of  American Express (AXP)

Valuation Ratios
P/E Ratio 14.6
Price to Sales 2.4
Price to Book 3.9
Price to Tangible Book
Price to Cash Flow 9.6
Price to Free Cash Flow 11.5
Growth Rates
Sales Growth Rate -1.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 2.5%
Cap. Spend. - 3 Yr. Gr. Rate 6.4%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 229.2%
Total Debt to Equity 526.2%
Interest Coverage 6
Management Effectiveness
Return On Assets 4.1%
Ret/ On Assets - 3 Yr. Avg. 4.1%
Return On Total Capital 4.2%
Ret/ On T. Cap. - 3 Yr. Avg. 4.3%
Return On Equity 26.3%
Return On Equity - 3 Yr. Avg. 26.8%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 74%
Gross Margin - 3 Yr. Avg. 75%
EBITDA Margin 33.3%
EBITDA Margin - 3 Yr. Avg. 32.9%
Operating Margin 24.7%
Oper. Margin - 3 Yr. Avg. 24.8%
Pre-Tax Margin 24.7%
Pre-Tax Margin - 3 Yr. Avg. 24.8%
Net Profit Margin 16.5%
Net Profit Margin - 3 Yr. Avg. 16.3%
Effective Tax Rate 33.2%
Eff/ Tax Rate - 3 Yr. Avg. 34.2%
Payout Ratio 22.3%

AXP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AXP stock intrinsic value calculation we used $32717 million for the last fiscal year's total revenue generated by American Express. The default revenue input number comes from 2016 income statement of American Express. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our AXP stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 12.6%, whose default value for AXP is calculated based on our internal credit rating of American Express, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of American Express.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of AXP stock the variable cost ratio is equal to 76.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for AXP stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for American Express.

Corporate tax rate of 27% is the nominal tax rate for American Express. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the AXP stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for AXP are equal to 15.6%.

Life of production assets of 10 years is the average useful life of capital assets used in American Express operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for AXP is equal to 50%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $20501 million for American Express - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 913.94 million for American Express is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of American Express at the current share price and the inputted number of shares is $79.9 billion.

RELATED COMPANIES Price Int.Val. Rating
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COMPANY NEWS

▶ Visa, American Express, MasterCard Beat Analyst Estimates   [Aug-17-17 01:08PM  Market Realist]
▶ [$$] US companies crack down on key services for hate groups   [Aug-16-17 09:28PM  Financial Times]
▶ US Market Indexes Mostly Lower Tuesday   [11:06AM  GuruFocus.com]
▶ [$$] Warren Buffett's Berkshire Validates Another Credit-Card Company   [Aug-15-17 05:04PM  The Wall Street Journal]
▶ Bank of America Joins the Premium Rewards Card Game   [Aug-12-17 11:12AM  Motley Fool]
▶ Amazon.com, Inc. (AMZN) Stock Is Becoming an AI Juggernaut   [Aug-11-17 10:45AM  InvestorPlace]
▶ The beginning of a global payments powerhouse   [Aug-09-17 01:39PM  Yahoo Finance Video]
▶ 3 Warren Buffett Stocks to Buy in August   [Aug-07-17 08:32AM  Motley Fool]
▶ Credit Card Rewards Are Playing Harder to Get   [Aug-04-17 05:00AM  Bloomberg]
▶ Why Mastercard Has Premium Valuations   [Aug-03-17 10:36AM  Market Realist]
▶ Mastercards Dividends to Increase in 2017   [09:08AM  Market Realist]
▶ Mastercards Initiatives to Prevent Fraud   [Aug-02-17 10:39AM  Market Realist]
▶ AmEx, Taco Bell struggle in NBA sponsor loyalty survey   [Jul-30-17 05:50PM  American City Business Journals]
▶ Dow Jones Closes at Record High and Gains for the Week   [Jul-28-17 05:51PM  GuruFocus.com]
▶ The Top General Motors Shareholders (GM)   [08:24AM  Investopedia]
▶ How Are Visas Dividends Trending?   [07:37AM  Market Realist]
▶ Amexs International Consumer and Network Services Division   [Jul-24-17 02:36PM  Market Realist]
▶ Large-Cap Stocks Lower, Technology Gains   [10:38AM  GuruFocus.com]
▶ American Express: Do Leave Home Without It   [08:00AM  TheStreet.com]
▶ Visa's third-quarter profit beats expectations   [Jul-20-17 05:45PM  Associated Press]
▶ American Express Expresses Mixed Signals   [08:31AM  TheStreet.com]
▶ [$$] American Express Profit Falls   [12:39AM  The Wall Street Journal]
▶ American Express tops Street 2Q forecasts   [Jul-19-17 09:16PM  Associated Press]
▶ [$$] American Express Profit Falls   [07:13PM  The Wall Street Journal]
▶ American Express, United Rentals Beat; Alcoa Warns On Costs   [06:23PM  Investor's Business Daily]
▶ American Express profit dips 36 pct   [04:15PM  Reuters]
Stock chart of AXP Financial statements of AXP
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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