DCF Studio

    AXP · NYQ · Financial Services

    American Express Company

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 266.10

    Market price

    USD 311.56

    Implied upside

    -14.6%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Wrong toolThis is a financial. Banks and insurers report no meaningful operating income, and capex and working capital do not mean what a free-cashflow model assumes, so a DCF will misprice it. The model below runs on best-effort numbers - treat it as an illustration, not a valuation.

    Value Per Share

    Perpetuity growth
    USD 266.10-14.6%
    Exit multiple
    USD 421.76+35.4%
    Market price
    USD 311.56

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn9bn19bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 80.2bnUSD 88.9bnUSD 98.7bnUSD 109.5bnUSD 121.5bn+11.0%
    EBITUSD 14.9bnUSD 16.5bnUSD 18.3bnUSD 20.3bnUSD 22.5bn+11.0%
    NOPATUSD 11.7bnUSD 13.0bnUSD 14.5bnUSD 16.0bnUSD 17.8bn+11.0%
    Add depreciation & amortisationUSD 2.2bnUSD 2.4bnUSD 2.7bnUSD 3.0bnUSD 3.3bn+11.0%
    Less capital expenditureUSD -2.5bnUSD -2.7bnUSD -3.0bnUSD -3.4bnUSD -3.8bn+11.0%
    Less increase in working capitalUSD 1.1bnUSD 1.2bnUSD 1.3bnUSD 1.5bnUSD 1.7bn-11.0%
    Free cashflow to firmUSD 12.5bnUSD 13.9bnUSD 15.4bnUSD 17.1bnUSD 19.0bn+11.0%
    Discount factor0.95530.87190.79580.72630.6629-
    Present valueUSD 12.0bnUSD 12.1bnUSD 12.3bnUSD 12.4bnUSD 12.6bn+1.3%
    Present Value Of The ForecastUSD 61.4bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.032Reported 1.048, pulled toward 1.0 (Blume)
    Cost of equity10.67%Risk-free + beta x equity risk premium
    Cost of debt7.00%Implied cost of debt of 15.1% is not a credible funding cost, so risk-free + 2bp is assumed instead. Interest expense and reported debt are measuring different things - common for banks, whose interest expense includes deposits that total debt excludes.
    Market capitalisationUSD 210.4bn78.5% of capital
    Total debtUSD 57.8bn21.5% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC9.57%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 266.10

    69% of EV

    Forecast FCFF, final year
    USD 19.0bn
    Capex at depreciation, working capital in reinvestment
    USD 17.8bn
    Less reinvestment at g/ROIC (21.8% of NOPAT)
    USD -3.9bn
    Capitalised
    USD 13.9bn
    ROIC (reported)
    11.5%
    Terminal value, undiscounted
    USD 202.0bn
    Terminal value, discounted
    USD 133.9bn
    Enterprise value
    USD 195.3bn
    Less net debt
    USD 10.1bn
    Equity value
    USD 185.2bn

    Exit at 14.2x EBITDA

    Value per shareUSD 421.76

    80% of EV

    Terminal value, undiscounted
    USD 365.4bn
    Terminal value, discounted
    USD 242.2bn
    Enterprise value
    USD 303.6bn
    Less net debt
    USD 10.1bn
    Equity value
    USD 293.5bn

    Spread between methods: 45%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    7.57%345.86356.68369.47384.89403.91
    8.57%296.41302.43309.33317.32326.74
    9.57%259.17262.46266.10270.19274.83
    10.57%230.11231.75233.50235.40237.46
    11.57%206.93207.61208.28208.96209.63

    Outlined: this model. Green text: above today's price of 311.56. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year11.0%14.6%+3.7pp
    EBIT margin18.5%21.6%+3.1pp
    Discount rate9.6%8.5%-1.0pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.