Is American Express Worth Buying Right Now?
American Express is a well-run financial giant.
The company's target audience is highly resilient to economic hardship.
Is the strength of this business model enough to make it a buy?
10 stocks we like better than American Express ›
American Express (NYSE: AXP) is one of the stocks owned by Warren Buffett within Berkshire Hathaway's stock portfolio. That fact alone is enough to get some investors to buy the stock.
However, you really need to consider other factors, like the business behind the stock, as well as its price tag. Here's a look at whether American Express is worth buying right now.
American Express is a financial giant, acting largely as a payment processor. The company's logo adorns credit cards that get used in retail establishments and online. Each transaction generates fee income for American Express. It issues its own cards, too, so it generates card/membership fees directly from customers there, as well.
One differentiation between American Express and its peers is that Amex, as it is often called, focuses on more affluent customers. Wealthier consumers tend to be more resilient during economic downturns. Basically, they have the money to keep spending even as less affluent consumers hunker down. That means that Amex's business will usually perform relatively well during recessions and other periods of economic uncertainty.
So far, 2025 has been filled with uncertainty. From tariff fights to stock market corrections, the news has been filled with negative headlines. In fact, American Express' stock price fell along with the S&P 500 (SNPINDEX: ^GSPC) earlier in the year. And it has recovered along with the index as well, as investors regained confidence.
What's notable, however, is that American Express' price moves have been more dramatic than the market's moves.
That's an interesting sign, since it could mean that Amex's stock has more recovery potential ahead of it. Given the strength of its business model, that isn't an unreasonable assessment.
However, there's also a negative way to view the price swing. It could very well be that investors got overly enthusiastic about the business and bid the price up to unrealistic levels earlier in the year. And the return toward those levels just indicates that investors are, again, being overzealous with their expectations.
A look at traditional valuation metrics, perhaps unfortunately, suggests the second explanation is the more likely one. American Express' price-to-sales ratio is currently around 3.1, compared to a five-year average of 2.6. The price-to-earnings (P/E) ratio is currently about 20.5, versus a longer-term average of just under 19. And the price-to-book value ratio is 6.6 today, compared to a five-year average of roughly 5.
All three metrics suggest that American Express is expensive today. And they are buttressed by a nontraditional valuation tool: dividend yield, which falls as share price rises. American Express' dividend yield is about 1.1% today. Not only is that less than the already miserly 1.3% yield you could collect from the S&P 500 index, but it is also near the lowest levels of the past decade.
Again, the direction is pretty clear: Amex looks expensive.
There's a reason Warren Buffett owns American Express. It is a well-run business with some clear advantages over its peers.
Buffett didn't just buy Amex -- he's owned it for many years. And sticking with a good company is part of Buffett's investment approach. However, Buffett's mentor, Benjamin Graham, made an important observation that investors looking at American Express today should heed: Even great companies can be bad investments if you pay too much for them. And it looks like American Express is too expensive right now.
Before you buy stock in American Express, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and American Express wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $674,395!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $858,011!*
Now, it's worth noting Stock Advisor's total average return is 997% — a market-crushing outperformance compared to 172% for the S&P 500. Don't miss out on the latest top 10 list, available when you join .
See the 10 stocks »
*Stock Advisor returns as of June 2, 2025
American Express is an advertising partner of Motley Fool Money. Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.
Is American Express Worth Buying Right Now? was originally published by The Motley Fool
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