The excitement of investing in a company that can turn its fortunes around is a big draw for some speculators, so even companies that have no revenue, no profit, and a long track record can find investors. Unfortunately, the likelihood of these high-risk investments ever paying off is often very low, and many investors have to pay a high price to learn their lesson. A loss-making company has yet to prove itself with profits, and at some point the inflow of outside capital may dry up.
If this type of company is not your style, but you like companies that generate revenue and even profits, then you might be interested in American Express (NYSE:AXP). Even if this company is fairly valued by the market, investors would agree that American Express still has the opportunity to increase long-term value for shareholders by generating consistent profits.
Check out our latest analysis for American Express
How quickly does American Express grow earnings per share?
If you believe that markets are even remotely efficient, then over the long term you would expect a company’s share price to follow its earnings per share (EPS). Therefore, there are many investors who like to buy shares of companies whose EPS is growing. We can see that American Express has grown its EPS by 17% per year over the past three years. That’s a pretty good rate if the company can sustain it.
A careful look at revenue growth and earnings before interest and taxes (EBIT) margins can help assess the sustainability of recent earnings growth. It is noted that American Express’s revenue from operational business was lower than its revenue over the last twelve months, which may distort our analysis of its margins. American Express’s EBIT margins were fairly flat over the last year, but the company can be pleased to report a 9.6% increase in revenue to $58 billion for the period. That’s progress.
You can see the company’s revenue and earnings growth trend in the graph below. Click on the graph to see the actual numbers.
You don’t drive with your eyes in the rearview mirror, so you might be more interested in the free Report with analyst forecasts for American Express’ Future profits.
Are American Express insiders on the same page as all shareholders?
Since American Express has a market capitalization of US$175 billion, we wouldn’t expect insiders to own a large proportion of the shares. But thanks to their investment in the company, it’s good to see that there are still incentives to align their actions with shareholders. In fact, they have invested a significant amount in the company, currently valued at US$223 million. We’ll point out that this represents 0.1% of the company, which may be small given the sheer size of American Express, but it’s still worth mentioning. It still shows shareholders that there is some level of alignment between management and themselves.
Is it worth keeping an eye on American Express?
As mentioned, American Express is a growing company, which is encouraging. For those looking for a little more than that, the high percentage of insider ownership increases our excitement about this growth. The combination is definitely favored by investors, so you might want to put the company on a watchlist. Of course, identifying quality companies is only half the battle; investors need to know if the stock is undervalued, so you might want to consider the following: free discounted cash flow valuation of American Express.
While American Express certainly looks good, it could be attractive to more investors if insiders were to snap up shares. If you like to see companies that have more ownership, check out this handpicked selection of companies that not only boast strong growth but also have strong insider support.
Please note that the insider transactions discussed in this article are reportable transactions in the respective jurisdiction.
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This Simply Wall St article is of a general nature. We comment solely on the basis of historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.
