Wayman Value Investing - New Stock Recommendation - January 2024
A new position is being added to the Wayman portfolio
# # # New Position # # #
American Express Company (AXP)
Recent Price: 180.26
Market Cap: 131.35B
P/FCF: 7.08
P/E: 16.90
P/S: 2.20
LT Debt/Eq: 1.70
Projected 4yr FCF: 89B
Wayman Portfolio Tier: Gather
American Express Company (AXP), along with its subsidiaries, offers charge and credit payment card products and travel-related services. The company, under three segments - Global Consumer Services Group, Global Commercial Services, and Global Merchant and Network Services, provides a range of products and services. These include payment and financing products, network services, accounts payable expense management, travel, and lifestyle services. Additionally, the company offers merchant acquisition and processing, point-of-sale marketing, fraud prevention, and customer loyalty programs.
Operating since 1850 and headquartered in New York, American Express caters to consumers, small businesses, mid-sized companies, and large corporations. Its distribution channels include mobile and online applications, third-party vendors, direct mail, telephone, in-house sales teams, and direct response advertising. The company’s comprehensive suite of services encompasses not only payment solutions but also merchant support, loyalty programs, and fraud prevention.
AXP delivered solid performance in 2023 and the company’s resilience is notable amidst a challenging financial backdrop. The stock has supplied nice gains, rising 50% from $120 in early January 2021, outperforming the S&P500 over the last three years. Despite fluctuations, AXP has delivered decent returns each year, with 35% in 2021, -10% in 2022, and 25% in 2023. This consistent performance distinguishes AXP from many of the heavyweight players in the financial sector.
The third quarter of 2023 saw mixed results for AXP, with earnings surpassing consensus but revenues falling short. Total revenues increased by 13% year-over-year to $15.38 billion, driven by growth in non-interest revenues and a significant jump in net interest income. While provisions for credit losses increased, non-interest expenses as a percentage of revenues offset some impact, resulting in a 30% year-over-year increase in net income to $2.45 billion.
For the first nine months of 2023, AXP’s top line grew by 16% year-over-year to $44.72 billion. Projections indicate a continuation of this momentum in the fourth quarter, with expected revenues reaching $60.75 billion for the year. AXP’s resilience and consistent performance position it as an uncommon bargain despite the uncertain macroeconomic environment.
Please keep in mind that while some investors might rely on market catalysts when considering what new positions to take, Wayman considers its style to be “catalyst-free investing.” Our reason for purchasing will always be based on our calculations which show a business is worth far more than where the market is pricing it. - Frank Memcaj, Founder of Wayman Value Investing