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Each week we run a DCF (Discounted Cash Flow) model on a company from our watchlist. This week’s pick: American Express Company (AXP).

Profile

American Express is one of the world’s leading integrated payments companies, providing charge and credit card products, travel-related services, and global merchant processing. Its powerful brand, affluent customer base, and closed-loop network create a durable competitive advantage.

With a focus on premium cardholders and disciplined risk management, AXP consistently delivers high returns on equity and steady growth in fee-based revenue. The company’s digital and merchant services ecosystem continues to expand, while rising interest income from lending portfolios adds another profit lever.

DCF Analysis

Inputs

• Discount Rate: 10%
• Terminal Growth Rate: 3%
• WACC: 10%

Forecasted Free Cash Flows (in billions USD)

Total Present Value of FCFs = $55.4B

Terminal Value Calculation

Using perpetuity growth model with 2029 FCF = $16.6B:

TV = (16.6 × 1.03) ÷ (0.10 − 0.03) = $244.3B

Present Value of Terminal Value = $151.7B

Enterprise Value

Enterprise Value = 55.4B + 151.7B = $207.1B

Net Debt

• Cash & Equivalents: $40.6B
• Total Debt: $51.1B
• Net Debt = $10.5B

Equity Value & Per-Share Value

Equity Value = 207.1B − 10.5B = $196.6B

Shares Outstanding: ~703 million

Intrinsic Value per Share ≈ $280

Conclusion

• DCF Value: $280
• Current Price: ~$358
• Margin of Safety: –28%

American Express continues to generate strong free cash flow and maintain a premium brand position in global payments. However, based on conservative growth assumptions, the stock currently trades above intrinsic value. While not a deep-value opportunity, AXP’s stable profitability, disciplined underwriting, and growing digital ecosystem make it a high-quality compounding franchise worth monitoring for pullbacks.

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