Is American Express (AXP) Overvalued Amid Record Gains—A Sell Signal or Sustained Growth Story?

American Express (AXP) has surged to record highs in 2025, driven by robust revenue growth and a dominant position in the global consumer finance sector. Yet, as the stock trades at a trailing price-to-earnings (P/E) ratio of 23.25 and a forward P/E of 21.88 [5], investors are asking: Is AXP overvalued, or is this a reflection of its sustained growth narrative? To answer this, we must dissect its valuation metrics, compare them to industry benchmarks, and assess the sustainability of its financial performance.

Valuation Metrics: A Tale of Two Ratios

AXP’s P/E ratio appears reasonable when benchmarked against the Consumer Finance industry’s average P/E of 25.3x as of August 2025 [6]. This suggests the market is not paying a premium for AXP’s earnings relative to its peers. However, the story shifts when examining the price-to-book (P/B) ratio. AXP’s P/B ratio has skyrocketed to 7.13 as of August 2025, up from an average of 4.73 in 2023 [1]. In contrast, the industry’s P/B ratio for Q2 2025 is a mere 1.98 [1]. This stark divergence raises questions: Why is AXP trading at such a premium to book value compared to its peers?

The answer lies in AXP’s unique business model. Unlike traditional banks or lenders, American Express operates a high-margin, fee-driven ecosystem centered on credit card networks and premium services. Its book value, which typically reflects tangible assets like cash or loans, understates the value of its intangible assets—brand equity, customer loyalty, and network effects. This justifies a higher P/B ratio, but only if the company can sustain its margins and growth.

Revenue and Earnings Growth: AXP’s Outperformance

AXP’s financial performance has been a key driver of its valuation. For 2024, the company reported $74.2 billion in revenue, a 10.15% increase from 2023 [2], and operating income of $12.9 billion, up 22.66% year-over-year [6]. Over the past four years, AXP’s revenue has grown at a compound annual rate of 13.4%, outpacing the Consumer Finance industry’s 8.4% average [4]. This outperformance is rooted in AXP’s ability to capitalize on global spending trends, particularly in high-net-worth and business travel segments.

However, the industry’s broader context complicates this narrative. While AXP’s earnings growth is impressive, the Consumer Finance sector as a whole is projected to grow at a 6.8% CAGR through 2032 [2], driven by digital adoption and expanding credit access. AXP’s growth, while strong, must be evaluated against this backdrop. If the company’s revenue growth slows to match industry averages, its current valuation multiples could appear stretched.

EBITDA Margins: A Contradiction in the Data

A critical point of contention is AXP’s EBITDA margin. Some sources report a 0.00% margin for 2023–2025 [2], while others show a 5.17% margin for Q2 2025 [3]. This discrepancy likely stems from differing methodologies—some sources may exclude non-operational items or use adjusted figures. For context, the Consumer Finance industry’s EBITDA margin for Q2 2025 is 36.98% [1], far exceeding AXP’s reported 5.17%.

This gap suggests AXP’s operational efficiency lags behind its peers, potentially due to high costs associated with its premium services or regulatory expenses. Yet, AXP’s operating income has grown consistently, indicating that factors beyond EBITDA—such as revenue diversification and pricing power—may be masking margin pressures. Investors must scrutinize whether AXP can improve its EBITDA margins without compromising its high-touch customer model.

The Narrative-Driven Investment Case

AXP’s valuation is not just a numbers game—it’s a story of brand strength and market positioning. The company’s global travel and business services segments have benefited from post-pandemic spending rebounds, with Q2 2025 revenue up 9% year-over-year [1]. Meanwhile, the broader consumer finance market is expanding, projected to grow from $1.8 trillion in 2023 to $3.2 trillion by 2032 [2]. AXP’s ability to capture a disproportionate share of this growth hinges on its capacity to innovate in digital payments and retain high-margin clients.

Yet, risks persist. AXP’s P/B ratio of 7.13 is far above historical averages and industry norms, implying investors are paying a significant premium for intangible assets. If macroeconomic headwinds—such as rising interest rates or a slowdown in discretionary spending—erode AXP’s growth, this premium could contract rapidly.

Conclusion: A Sell Signal or Sustained Growth?

AXP’s valuation is a mixed bag. Its P/E ratio is in line with industry standards, and its revenue growth outpaces peers, but its P/B ratio and EBITDA margins suggest operational challenges. For investors, the key question is whether AXP’s premium valuation is justified by its unique business model and growth trajectory.

If the company can maintain its earnings momentum, expand EBITDA margins, and capitalize on the $3.2 trillion consumer finance market [2], the current valuation may prove warranted. However, if growth slows or margins fail to improve, the stock could face downward pressure. In a narrative-driven market, AXP’s story remains compelling—but investors must ensure the fundamentals keep up with the hype.

Source:
[1] American Express Price/Book Ratio 2010-2025 [https://www.macrotrends.net/stocks/charts/AXP/american-express/price-book]
[2] American Express Revenue 2010-2025 | AXP [https://www.macrotrends.net/stocks/charts/AXP/american-express/revenue]
[3] American Express (AXP) Quarterly EBITDA [https://www.financecharts.com/stocks/AXP/income-statement/ebitda]
[4] American Express Past Earnings Performance [https://simplywall.st/stocks/us/diversified-financials/nyse-axp/american-express/past]
[5] American Express Company (AXP) Stock Price, News, Quote [https://finance.yahoo.com/quote/AXP/]
[6] U.S. Consumer Finance Industry Analysis [https://simplywall.st/markets/us/financials/consumer-finance]