Intrinsic value of American Express - AXP

Previous Close

$102.65

  Intrinsic Value

$21.94

stock screener

  Rating & Target

str. sell

-79%

Previous close

$102.65

 
Intrinsic value

$21.94

 
Up/down potential

-79%

 
Rating

str. sell

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

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 2017), $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 90.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.10
  2.39
  2.65
  2.89
  3.10
  3.29
  3.46
  3.61
  3.75
  3.88
  3.99
  4.09
  4.18
  4.26
  4.34
  4.40
  4.46
  4.52
  4.56
  4.61
  4.65
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
Revenue, $m
  31,357
  32,106
  32,958
  33,909
  34,959
  36,108
  37,357
  38,707
  40,159
  41,716
  43,380
  45,154
  47,042
  49,047
  51,174
  53,427
  55,811
  58,332
  60,995
  63,806
  66,771
  69,898
  73,193
  76,664
  80,320
  84,169
  88,220
  92,482
  96,966
  101,682
Variable operating expenses, $m
  22,891
  23,403
  23,985
  24,635
  25,352
  26,138
  26,991
  27,913
  28,905
  29,969
  29,640
  30,853
  32,142
  33,513
  34,966
  36,506
  38,135
  39,857
  41,676
  43,597
  45,623
  47,759
  50,011
  52,383
  54,881
  57,511
  60,278
  63,191
  66,254
  69,477
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
  22,891
  23,403
  23,985
  24,635
  25,352
  26,138
  26,991
  27,913
  28,905
  29,969
  29,640
  30,853
  32,142
  33,513
  34,966
  36,506
  38,135
  39,857
  41,676
  43,597
  45,623
  47,759
  50,011
  52,383
  54,881
  57,511
  60,278
  63,191
  66,254
  69,477
Operating income, $m
  8,466
  8,703
  8,973
  9,274
  9,607
  9,971
  10,366
  10,794
  11,254
  11,747
  13,739
  14,301
  14,899
  15,534
  16,208
  16,922
  17,677
  18,475
  19,319
  20,209
  21,148
  22,138
  23,182
  24,281
  25,439
  26,658
  27,941
  29,291
  30,711
  32,205
EBITDA, $m
  28,611
  29,295
  30,071
  30,939
  31,897
  32,946
  34,086
  35,317
  36,642
  38,062
  39,581
  41,199
  42,922
  44,752
  46,692
  48,748
  50,924
  53,224
  55,653
  58,218
  60,923
  63,776
  66,783
  69,950
  73,286
  76,798
  80,494
  84,383
  88,474
  92,777
Interest expense (income), $m
  1,700
  4,314
  3,897
  3,974
  4,060
  4,157
  4,264
  4,381
  4,509
  4,646
  4,794
  4,953
  5,122
  5,303
  5,495
  5,700
  5,916
  6,146
  6,389
  6,646
  6,917
  7,203
  7,505
  7,824
  8,160
  8,513
  8,886
  9,278
  9,691
  10,125
  10,582
Earnings before tax, $m
  4,152
  4,806
  4,999
  5,214
  5,449
  5,706
  5,985
  6,285
  6,608
  6,953
  8,787
  9,179
  9,596
  10,039
  10,508
  11,005
  11,531
  12,086
  12,673
  13,292
  13,945
  14,633
  15,358
  16,122
  16,926
  17,772
  18,663
  19,600
  20,586
  21,623
Tax expense, $m
  1,121
  1,298
  1,350
  1,408
  1,471
  1,541
  1,616
  1,697
  1,784
  1,877
  2,372
  2,478
  2,591
  2,711
  2,837
  2,971
  3,113
  3,263
  3,422
  3,589
  3,765
  3,951
  4,147
  4,353
  4,570
  4,799
  5,039
  5,292
  5,558
  5,838
Net income, $m
  3,031
  3,508
  3,649
  3,806
  3,978
  4,166
  4,369
  4,588
  4,823
  5,075
  6,414
  6,701
  7,005
  7,329
  7,671
  8,034
  8,418
  8,823
  9,251
  9,703
  10,180
  10,682
  11,211
  11,769
  12,356
  12,974
  13,624
  14,308
  15,028
  15,785

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  65,738
  67,309
  69,093
  71,087
  73,289
  75,699
  78,317
  81,146
  84,191
  87,454
  90,943
  94,662
  98,620
  102,824
  107,283
  112,007
  117,005
  122,289
  127,872
  133,764
  139,981
  146,536
  153,444
  160,722
  168,386
  176,455
  184,947
  193,883
  203,282
  213,169
Adjusted assets (=assets-cash), $m
  65,738
  67,309
  69,093
  71,087
  73,289
  75,699
  78,317
  81,146
  84,191
  87,454
  90,943
  94,662
  98,620
  102,824
  107,283
  112,007
  117,005
  122,289
  127,872
  133,764
  139,981
  146,536
  153,444
  160,722
  168,386
  176,455
  184,947
  193,883
  203,282
  213,169
Revenue / Adjusted assets
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
Average production assets, $m
  186,793
  191,258
  196,328
  201,994
  208,250
  215,097
  222,536
  230,576
  239,227
  248,500
  258,413
  268,982
  280,228
  292,173
  304,844
  318,266
  332,469
  347,484
  363,346
  380,090
  397,754
  416,380
  436,010
  456,689
  478,468
  501,395
  525,525
  550,915
  577,625
  605,717
Working capital, $m
  -166,349
  -170,324
  -174,840
  -179,885
  -185,457
  -191,554
  -198,180
  -205,340
  -213,043
  -221,302
  -230,129
  -239,541
  -249,556
  -260,195
  -271,478
  -283,431
  -296,080
  -309,452
  -323,577
  -338,489
  -354,220
  -370,807
  -388,288
  -406,704
  -426,099
  -446,517
  -468,006
  -490,617
  -514,403
  -539,421
Total debt, $m
  72,171
  73,585
  75,191
  76,986
  78,967
  81,136
  83,492
  86,039
  88,779
  91,716
  94,855
  98,203
  101,765
  105,549
  109,562
  113,813
  118,312
  123,068
  128,091
  133,395
  138,990
  144,889
  151,107
  157,657
  164,555
  171,816
  179,459
  187,501
  195,961
  204,859
Total liabilities, $m
  59,164
  60,578
  62,184
  63,979
  65,960
  68,129
  70,485
  73,032
  75,772
  78,709
  81,848
  85,196
  88,758
  92,542
  96,555
  100,806
  105,305
  110,061
  115,084
  120,388
  125,983
  131,882
  138,100
  144,650
  151,548
  158,809
  166,452
  174,494
  182,954
  191,852
Total equity, $m
  6,574
  6,731
  6,909
  7,109
  7,329
  7,570
  7,832
  8,115
  8,419
  8,745
  9,094
  9,466
  9,862
  10,282
  10,728
  11,201
  11,701
  12,229
  12,787
  13,376
  13,998
  14,654
  15,344
  16,072
  16,839
  17,645
  18,495
  19,388
  20,328
  21,317
Total liabilities and equity, $m
  65,738
  67,309
  69,093
  71,088
  73,289
  75,699
  78,317
  81,147
  84,191
  87,454
  90,942
  94,662
  98,620
  102,824
  107,283
  112,007
  117,006
  122,290
  127,871
  133,764
  139,981
  146,536
  153,444
  160,722
  168,387
  176,454
  184,947
  193,882
  203,282
  213,169
Debt-to-equity ratio
  10.980
  10.930
  10.880
  10.830
  10.770
  10.720
  10.660
  10.600
  10.540
  10.490
  10.430
  10.370
  10.320
  10.260
  10.210
  10.160
  10.110
  10.060
  10.020
  9.970
  9.930
  9.890
  9.850
  9.810
  9.770
  9.740
  9.700
  9.670
  9.640
  9.610
Adjusted equity ratio
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3,031
  3,508
  3,649
  3,806
  3,978
  4,166
  4,369
  4,588
  4,823
  5,075
  6,414
  6,701
  7,005
  7,329
  7,671
  8,034
  8,418
  8,823
  9,251
  9,703
  10,180
  10,682
  11,211
  11,769
  12,356
  12,974
  13,624
  14,308
  15,028
  15,785
Depreciation, amort., depletion, $m
  20,145
  20,591
  21,098
  21,665
  22,291
  22,975
  23,719
  24,523
  25,388
  26,316
  25,841
  26,898
  28,023
  29,217
  30,484
  31,827
  33,247
  34,748
  36,335
  38,009
  39,775
  41,638
  43,601
  45,669
  47,847
  50,139
  52,553
  55,092
  57,762
  60,572
Funds from operations, $m
  23,176
  24,100
  24,748
  25,471
  26,269
  27,141
  28,088
  29,111
  30,212
  31,391
  32,256
  33,599
  35,028
  36,546
  38,156
  39,860
  41,664
  43,571
  45,586
  47,712
  49,955
  52,320
  54,812
  57,438
  60,203
  63,113
  66,177
  69,400
  72,790
  76,357
Change in working capital, $m
  -3,421
  -3,976
  -4,515
  -5,046
  -5,572
  -6,097
  -6,626
  -7,160
  -7,704
  -8,259
  -8,827
  -9,412
  -10,015
  -10,638
  -11,284
  -11,953
  -12,648
  -13,372
  -14,126
  -14,911
  -15,731
  -16,587
  -17,481
  -18,416
  -19,394
  -20,418
  -21,489
  -22,611
  -23,786
  -25,018
Cash from operations, $m
  26,597
  28,076
  29,263
  30,517
  31,840
  33,238
  34,714
  36,272
  37,915
  39,650
  41,083
  43,011
  45,043
  47,184
  49,439
  51,813
  54,313
  56,943
  59,711
  62,623
  65,686
  68,907
  72,294
  75,854
  79,597
  83,531
  87,666
  92,011
  96,577
  101,374
Maintenance CAPEX, $m
  -18,295
  -18,679
  -19,126
  -19,633
  -20,199
  -20,825
  -21,510
  -22,254
  -23,058
  -23,923
  -24,850
  -25,841
  -26,898
  -28,023
  -29,217
  -30,484
  -31,827
  -33,247
  -34,748
  -36,335
  -38,009
  -39,775
  -41,638
  -43,601
  -45,669
  -47,847
  -50,139
  -52,553
  -55,092
  -57,762
New CAPEX, $m
  -3,844
  -4,464
  -5,070
  -5,666
  -6,256
  -6,846
  -7,440
  -8,040
  -8,650
  -9,274
  -9,912
  -10,569
  -11,246
  -11,946
  -12,670
  -13,422
  -14,203
  -15,015
  -15,862
  -16,744
  -17,664
  -18,626
  -19,630
  -20,680
  -21,778
  -22,927
  -24,130
  -25,390
  -26,710
  -28,092
Cash from investing activities, $m
  -22,139
  -23,143
  -24,196
  -25,299
  -26,455
  -27,671
  -28,950
  -30,294
  -31,708
  -33,197
  -34,762
  -36,410
  -38,144
  -39,969
  -41,887
  -43,906
  -46,030
  -48,262
  -50,610
  -53,079
  -55,673
  -58,401
  -61,268
  -64,281
  -67,447
  -70,774
  -74,269
  -77,943
  -81,802
  -85,854
Free cash flow, $m
  4,459
  4,932
  5,067
  5,218
  5,385
  5,567
  5,764
  5,978
  6,207
  6,453
  6,321
  6,601
  6,899
  7,216
  7,551
  7,907
  8,283
  8,681
  9,101
  9,545
  10,013
  10,506
  11,026
  11,573
  12,150
  12,757
  13,396
  14,068
  14,776
  15,519
Issuance/(repayment) of debt, $m
  -7,716
  1,414
  1,606
  1,795
  1,982
  2,168
  2,356
  2,547
  2,740
  2,937
  3,140
  3,348
  3,562
  3,784
  4,013
  4,251
  4,499
  4,756
  5,024
  5,303
  5,595
  5,899
  6,217
  6,550
  6,898
  7,262
  7,643
  8,042
  8,460
  8,898
Issuance/(repurchase) of shares, $m
  5,971
  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  
  -1,745
  1,414
  1,606
  1,795
  1,982
  2,168
  2,356
  2,547
  2,740
  2,937
  3,140
  3,348
  3,562
  3,784
  4,013
  4,251
  4,499
  4,756
  5,024
  5,303
  5,595
  5,899
  6,217
  6,550
  6,898
  7,262
  7,643
  8,042
  8,460
  8,898
Total cash flow (excl. dividends), $m
  2,714
  6,346
  6,673
  7,013
  7,366
  7,735
  8,121
  8,524
  8,947
  9,391
  9,460
  9,948
  10,461
  10,999
  11,565
  12,158
  12,782
  13,437
  14,125
  14,848
  15,608
  16,405
  17,243
  18,123
  19,048
  20,019
  21,039
  22,110
  23,235
  24,417
Retained Cash Flow (-), $m
  -9,002
  -157
  -178
  -199
  -220
  -241
  -262
  -283
  -304
  -326
  -349
  -372
  -396
  -420
  -446
  -472
  -500
  -528
  -558
  -589
  -622
  -655
  -691
  -728
  -766
  -807
  -849
  -894
  -940
  -989
Prev. year cash balance distribution, $m
  2,428
  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
  276
  282
  289
  297
  305
  315
  325
  336
  348
  361
  375
  390
  406
  423
  441
  461
  481
  502
  525
  549
  574
  601
  629
  659
  690
  723
  758
  794
  832
  873
Cash available for distribution, $m
  -3,860
  6,189
  6,495
  6,813
  7,146
  7,494
  7,859
  8,241
  8,643
  9,064
  9,111
  9,576
  10,065
  10,579
  11,119
  11,686
  12,282
  12,909
  13,567
  14,259
  14,986
  15,750
  16,552
  17,396
  18,282
  19,212
  20,190
  21,217
  22,295
  23,429
Discount rate, %
  9.60
  10.08
  10.58
  11.11
  11.67
  12.25
  12.86
  13.51
  14.18
  14.89
  15.64
  16.42
  17.24
  18.10
  19.01
  19.96
  20.96
  22.00
  23.10
  24.26
  25.47
  26.75
  28.08
  29.49
  30.96
  32.51
  34.13
  35.84
  37.63
  39.51
PV of cash for distribution, $m
  -3,522
  5,107
  4,803
  4,470
  4,115
  3,746
  3,369
  2,991
  2,620
  2,262
  1,843
  1,545
  1,273
  1,030
  817
  636
  484
  360
  261
  185
  128
  86
  56
  35
  22
  13
  7
  4
  2
  1
Current shareholders' claim on cash, %
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

American Express Company, together with its subsidiaries, is a global services company. The Company's principal products and services are charge and credit card products, and travel-related services, which are offered to consumers and businesses around the world. Its segments include the U.S. Consumer Services (USCS), International Consumer and Network Services (ICNS), Global Commercial Services (GCS) and Global Merchant Services (GMS). The USCS includes the U.S. Consumer Card Services business and consumer travel services in the United States. The ICNS includes the International Consumer Card Services business, Global Network Services business and consumer travel services outside the United States. The GCS includes the Global Corporate Payments business, small business services businesses in the United States and internationally, financing products and foreign exchange services operations. The GMS includes the Global Merchant Services business and global loyalty coalition businesses.

FINANCIAL RATIOS  of  American Express (AXP)

Valuation Ratios
P/E Ratio 17.2
Price to Sales 2.8
Price to Book 4.5
Price to Tangible Book
Price to Cash Flow 11.3
Price to Free Cash Flow 13.5
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 $30712 million for the last fiscal year's total revenue generated by American Express. The default revenue input number comes from 2017 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 2.1% 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 9.6%, 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 73.1%.

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 5.4% 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 0.9%.

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 595.7%.

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 -530.5%. 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 - $0 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 883 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 $90.6 billion.

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