american express (AXP – (Free Report) recently appeared on the list of most searched stocks on Zacks.com. Therefore, you may need to consider some important factors that may influence the stock's performance in the near future.
The credit card issuer and global payments company's stock has returned +8% over the past month, compared to a +3.8% change in the Zacks S&P 500 Composite Index. The Zacks Financial – Other Services industry, which includes American Express, has gained 3% in this period. The key question here is where the stock is likely to go in the short term.
While media reports and rumors about significant changes in a company's business outlook typically trigger stock price trends and lead to immediate price movements, there are always certain fundamental factors that ultimately drive the buy-and-hold decision. Exists.
Regarding revisions to performance forecasts
At Zacks, we prioritize evaluating changes in company earnings estimates rather than focusing on anything else. This is because we believe that the fair value of a stock is determined by the present value of its future income stream.
Essentially, we study how the sell-side analysts covering a stock are revising their earnings estimates to reflect the impact of the latest business trends. And as a company's earnings expectations rise, so will the fair value of its stock. If the fair value is higher than the current market price, investors will be more willing to buy the stock, causing the price to rise. This is why empirical research shows a strong correlation between trends in earnings estimate revisions and short-term stock price movements.
For the current quarter, American Express is expected to post earnings of $3 per share, representing a +25% change from the year-ago period. The Zacks Consensus Estimate has changed -0.9% over the past 30 days.
The consensus earnings estimate for the current fiscal year of $12.80 represents a +14.2% year-over-year change. This estimate has changed -0.8% over the past 30 days.
Next year's consensus earnings estimate of $14.71 represents a +14.9% change from the earnings that American Express was expected to report a year ago. Over the past month, the forecast has changed by +1.5%.
The Zacks Rank, a proprietary stock evaluation tool with an impressive, outside-audited track record of impressive results, harnesses the power of earnings estimate revisions to be a more conclusive indicator of a stock's short-term price performance. . The magnitude of the recent consensus estimate change, along with three other factors related to the earnings estimate, has given American Express a Zacks Rank of #2 (Buy).
The chart below shows the company's consensus EPS estimate over the next 12 months over time.
12 months EPS
Expected revenue growth rate
Earnings growth is arguably the best indicator of a company's financial health, but nothing will happen if a company can't grow its revenue. After all, it's nearly impossible for a company to increase profits over a long period of time without increasing revenue. Therefore, it's important to know a company's earnings growth potential.
American Express's current quarter consensus revenue estimate is $15.74 billion, representing a year-over-year change of +10.2%. Estimates for the current and next fiscal year are $66.23 billion and $71.93 billion, representing changes of +9.4% and +8.6%, respectively.
Last reported results and surprising details
American Express reported revenue of $15.8 billion in its last reported quarter. This represents a +11.5% year-over-year change. EPS for the same period was $2.62, compared to $2.07 a year ago.
The reported earnings are a surprise of -1.43% when compared to the Zacks Consensus Estimate of $16.03 billion. EPS surprise was -1.13%.
Over the last four quarters, American Express has surpassed consensus EPS estimates two times. He's the only time the company has exceeded consensus revenue estimates during this period.
evaluation
You cannot make efficient investment decisions without considering stock valuation. To predict a stock's future price performance, it is important to determine whether the current price accurately reflects the intrinsic value of the underlying business and the company's growth prospects.
The present value of a company's valuation multiples, such as price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), and the past value of your company Comparing a company to its peers based on these parameters can help you see if it is overvalued, overvalued or undervalued, but how reasonable its stock is You can get a good idea of what
As part of the Zacks Style Scores system, the Zacks Value Style Score (which evaluates both traditional and unconventional valuation metrics) categorizes stocks into five groups, ranging from A to F, with A ranging from B to F. B is better than C, and so on), and can help identify whether a stock is overvalued, fairly valued, or temporarily undervalued. Masu.
American Express is rated B on this score, indicating that it trades at a discount to its peers. Click here to see the values of some of the metrics that determined this grade.
conclusion
The facts discussed here, and many others on Zacks.com, may help you decide whether the market buzz surrounding American Express is worth paying attention to. However, the company's Zacks Rank #2 suggests it has the potential to outperform the broader market in the near term.
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