American Express (AXP)

Total return at 5 years: 11.2%/year = 9.7% appreciation + 1.4% dividend. The target price ($496) is ex-dividend; the $27 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $600 · Multiples $422) exceeds the market price ($312).

Today — fairly valued: at $312 trades ~26.1% below its value discounted to today (~$422); the discount is positive but does not reach the margin of safety we require (≥38%).

At 5 years — Infravalorado: the target price ($496) plus dividends yield above the required average return (10%) — the business compounds.

The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$264.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($312) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (-3.7%/year) than we project (11.0%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~$9.4 bn of owner earnings in year 5 (vs ~$19.1 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). The flow is returned almost in full (dividend + buyback) or redeployed into the operation, so that EV stays roughly flat and multiples compress because the metric grows, not because of cash accumulation. The valuation is done on Utilidad a común (P/E). In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

Rolling grid: year 0 is the real TTM (revenue net of interest of US$75.95 billion as of Jun 30, 2026). American Express is a premium closed-loop payments network (it sees both ends of the transaction —issuer + acquirer + network— unlike Visa/Mastercard, which only run the network) plus a card lender (book ~$152bn). It is valued on P/E over earnings to common (~$16 EPS in the TTM, FY26 guidance $17.30-17.90): it is a financial —deposits ($158bn) + debt ($59bn) fund the loan book—, so equity is valued (cash start 0/debt 0), earnings are levered → P/E delivers equity directly and the funding is not subtracted (it is offset by the assets, §7). A very high quality franchise: ROE ~34%, a premium brand, a card-fee annuity (+18%) and structurally low credit losses (principal write-off 2.0%, delinquency 1.3%, best-in-class) from the spend-centric model of affluent customers. Earnings compound ~12%/year (revenue ~9-10% + buybacks ~2.3%/year). Exit multiple 17.5×: it discounts the credit cycle (American Express is also a lender), regulation and the cyclicality of premium spending. Berkshire owns 22% (Buffett, a 35-year position).

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (the metric grows while EV stays roughly flat). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $496 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $312, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $496 in 5 years plus $27 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $422. Against the current market price ($312), the margin of safety is 26.1% (trades below the maximum → there is margin) and the total return at that price would be 11.2% annually.

• Multiple vs. the band. P/E ~19× — the mid-to-upper range of the payments band (15-20×), a full price.
• Full price. There is no missing-buyers or motivated-sellers discount. The market recognizes the quality. A compounding purchase, not a bargain.
• Margin of safety. Base 5-year $496 vs. price $312 → total return +11%/year, with multiple compression (toward ~17.5×) eating into part of the growth. Moderate margin; balanced asymmetry.

• ✓ ROIC exceeds the cost of capital (~10%)
• ✓ High incremental ROIC (compounding)
• ✓ CFROIC backs up the ROIC (99%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• ROE vs. the 10% bar. ROE ~34% — exceptional (the quality metric for a financial company, well above the bar). The spend-centric model + the fee annuity deliver exceptionally high-quality returns.
• Quality of cash. Earnings are high quality (recurring fee annuity + best-in-class credit spread). Stock-based compensation is small (~$0.6bn). The best-in-class write-off (2.0%) confirms the quality of the book.
• Balance sheet. It is a financial company: deposits + debt fund the book (offset by the assets). CET1 10.5%, delinquency 1.3%. Solid; the risk is the credit cycle, not solvency.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

American Express's engine is twofold: billed business ($1,670bn, +8%, monetized at the 2.24% discount rate) and the premium card fee annuity (net card fees $10.0bn, +18% — the high-margin recurring revenue growing faster). The loan book (~$152bn, ROE ~34%, best-in-class 2.0% write-off) adds the interest spread (8.1% net yield). Affluent millennials/Gen-Z are the fastest-growing cohort; International Card is the fastest segment (+14%). American Express returns 71% of earnings (buyback ~$5.3bn + dividend $2.3bn); it reinvests heavily in marketing ($6.3bn) to acquire premium customers.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Real, not nominal. Growth in spend (+8%) + fees (+18%) + the loan book (+9%) is real and high-quality. International Card is the fastest (+14-20%).
• Growth engine. The premium fee annuity (+18%, the most durable quality engine) + spend + affluent millennials/Gen-Z + international. Earnings compound ~12% with the buyback.
• Cyclicality. Premium spend + the credit book are cyclical: a recession decelerates spend and pushes up write-offs. The risk to growth during a downturn.

• Relevant in 10 years (recurrence). Payments + premium credit are recurring infrastructure; the fee annuity (+18%) is contractual. The spend-centric model built around affluent customers is resilient. High recurrence.
• Pricing power. Strong in the premium niche: it raised Platinum to $895 and fees grew +18%. But the discount rate is under regulatory pressure (interchange-rate caps).
• Moat and its direction. Wide moat (closed loop + premium brand + spend-centric + cobrand); direction stable to widening within the premium niche. But it is a niche, with regulation as a threat.
• Credit risk (it is a lender). Unlike Visa/Mastercard, American Express lends (~$152bn); a recession hits it. Losses are best-in-class (2.0%) but the cyclicality is real — the disconfirmer.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✓Leverage (net debt / EBITDA)Net cash $0 bn
• ✕Interest coverage (EBIT / interest)1.7x
• –Liquidity (current ratio)no data
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 99% of ROIC
• ✓Value creation (ROIC − 10% bar)+24pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 1.0x — no over-investment
• !Float / working capitalConsumes cash $0.6 bn (positive WC)
• ✓Dilution (SBC % of revenue + shares)SBC 0.8% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Credit quality. 2.0% principal write-off, 1.3% delinquency — best-in-class, far below a mass-market issuer, thanks to the spend-centric model built around affluent customers. The credit-quality superpower.
• Capital + funding. CET1 10.5% (target 10-11%). Deposits ($158bn) + debt fund the book, offset by the assets. Constrained by the Fed (bank holding company), but solid.
• Capital returns. Returns 71% of earnings (buyback + dividend). The dividend (1.1%, +16%) is small; the buyback (~2.3%/year) is the primary use. Sustainable.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Skin in the game. Squeri, a 40-year veteran, meets the 10× salary requirement. ⭐ Berkshire (22%, Buffett, 35 years, a passive pact) is the anchor of quality. High alignment.
• Capital allocation. Returns 71% of earnings (buyback + dividend) + reinvests in premium-customer acquisition ($6.3bn marketing). Constrained by the Fed. No large risky M&A.
• Execution / integrity. The premium strategy (refreshes, millennials, international) executed well (fees +18%, spend +8%). The Buffett seal is a vote of confidence in the integrity.

• It is not cheap — it trades at ~19× earnings, a full price for a franchise of this quality. Against a pure network it looks 'reasonable', but American Express is also a lender and carries the credit risk of its own loan book.
• The market prices in the quality (ROE 34%, fee annuity +18%, Berkshire 22%) — there is no evident missing-buyers or motivated-sellers discount.
• The only structural discount is vs. the pure networks: American Express carries a lender's cyclicality + regulation, and that is why it trades below Visa/Mastercard despite comparable growth and brand strength.

American Express is not a bargain — it is an exceptional franchise at a fair price. The perception-reality gap does not favor the buyer here: the market recognizes the quality (which is why it trades at 19× guidance), and there is no clear source of discount (missing buyers / motivated sellers). The only "discount" is structural versus a pure network, justified because American Express is also a lender (credit cycle + regulation). The "fairly valued" verdict comes from quality growth (~12%) being partly offset by multiple compression — it is a compounding purchase at a fair price, with Berkshire as a quality stamp, not a discount opportunity.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at ~0%/year (-2% total): the margin of safety protects the downside. The bull (+16%/year, +113% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Credit cycle. The central disconfirmer: American Express is a lender (~$152bn, ~79% US); a recession pushes up write-offs and provisions. The cyclicality that separates it from the pure networks.
• Regulation. Discount-rate caps (already pushed it off the network in the EU/Australia) + potential US interest-rate caps + Fed capital restrictions. A structural threat.
• Competition. Visa/Mastercard (larger) + Chase Sapphire (for premium customers) + fintechs/BNPL (lower cost, seeking to disintermediate). Customer acquisition is competitive.
• Full price. At a full price, the margin for error is thin: a credit or growth stumble at this multiple hurts. Multiple compression is already baked into the base.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  A wide moat and ROIC 34% above the 10% bar, but the margin is limited (+26%) → excellent business at a fair price.

• Peter Lynch Growth at a reasonable price (GARP)

  A fast grower growing 11% at a PEG of 1.7 → reasonable for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 7% (EBIT/EV) + ROIC 34% → brushes the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts -4% vs our 11%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -2%/yr, bull-scenario ceiling +15%/yr over 5y → capital protected, asymmetry in your favor.

• Pat Dorsey Moat strength (Five Rules)

  A wide moat, stable; sources: network effects, intangibles, switching costs, cost advantage, efficient scale → passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting -4%, within what we project (11%) — the story squares with the numbers.