Benzinga – Benzinga Contributor, Zacks.
american express (NYSE: AXP) is one of the most searched stocks on Zacks.com these days. So it's worth looking at some facts that could shape the stock's performance in the short term.
The credit card issuer and global payments company's stock returned +6.5% over the past month, compared to -3% for the Zacks S&P 500 Composite Index. The Zacks Financial – Other Services industry, which includes American Express, has declined 5.5% in this period. The key question here is where the stock price is likely to go in the short term.
While media releases and rumors about significant changes in a company's business outlook typically cause its stock to “trend” and lead to immediate price movements, there are some fundamentals that ultimately govern buy-and-hold decisions. There are always facts.
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.
Our analysis is fundamentally based on how the sell-side analysts covering a given stock are revising their earnings estimates to account for the latest business trends. As a company's earnings expectations rise, so does the fair value of its stock. And when a stock's fair value is higher than its current market price, investors tend to buy the stock, which causes the stock price to rise. For this reason, empirical research has shown that there is a strong correlation between trends in earnings forecast revisions and short-term stock price movements.
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American Express is expected to post earnings of $3.26 per share for the current quarter, representing a year-over-year change of +12.8%. Over the past 30 days, the Zacks Consensus Estimate has changed by -0.2%.
The consensus earnings estimate for the current fiscal year of $12.89 represents a +15% change from the prior year. Over the past 30 days, this estimate has changed by +1.1%.
Next year's consensus earnings estimate of $14.82 represents a +15% change from the earnings that American Express was expected to report a year ago. Over the past month, the forecast has changed by +0.6%.
The Zacks Rank, a proprietary stock evaluation tool with an impressive, outside-audited track record of impressive results, leverages 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 #3 (Hold).
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 $16.53 billion, representing a +9.8% year-over-year change. Estimates for the current and next fiscal year are $66.31 billion and $72.04 billion, representing changes of +9.6% and +8.6%, respectively.
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Last reported results and surprising details
American Express reported revenue of $15.8 billion in its last reported quarter. This represents a +10.6% year-over-year change. EPS for the same period was $3.33, compared to $2.40 a year ago.
The reported earnings represent a surprise of +0.28% when compared to the Zacks Consensus Estimate of $15.76 billion. EPS surprise was +12.12%.
Over the last four quarters, American Express has surpassed consensus EPS estimates three 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. Whether a stock's current price accurately reflects the intrinsic value of the underlying business and the company's growth prospects is a key determinant of future stock performance.
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 will help you see how reasonable its stock price 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 being B 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.
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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 #3 suggests it could outperform the broader market in the near term.
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