Does American Express Stock Have Room to Run?

Taking a closer look at AXP fundamentals

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Credit card company and consumer lending giant American Express Company (NYSE:AXP) will step into the earnings confessional and report second-quarter results on Friday, July 23 before the open. In recent history, American Express has beat earnings expectations on three of its last four earnings reports. However, the post-earnings reactions tell a different story.

The last four of AXP's post-earnings reactions have been to the downside, including a 4.1% drop in January. Overall, the stock averages a timid post-earnings move of 2.4% in the last eight quarters, regardless of direction.

On the charts, American Express stock scored a record high of $168.46 earlier today, and is up 39.2% year-to-date. Along the way, the shares' ascending 40-day moving average has contained pullbacks in March, April, and June. The company also has a forward dividend of $1.72 and a dividend yield of 1.04%.

AXP Stock Chart

Options are well-priced at the moment, too, from a volatility perspective. The stock's Schaeffer's Volatility Index (SVI) of 22% stands higher than 5% of all other readings in its annual range, implying that options players are pricing in relatively low volatility expectations at the moment.

From a fundamental perspective, American Express stock appears to be overvalued at the moment. AXP currently trades at a high price-earnings ratio of 27.21 and American Express stock's forward price-earnings ratio isn’t much of an improvement, coming in at 24.57.

However, AXP still has plenty of room to recover after experiencing a 16% revenue decrease and a 54% net income decline in 2020 as a result of the Covid-19 pandemic. In fact, American Express’ trailing 12-month net income is already up by 65% compared to the company's 2020 numbers. Overall, American Express stock will likely continue to see slow and steady long-term growth. Investors may want to hold off for a better entry point given its all-time highs and the tried-and-true mantra; buy low, sell high.

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