A recently released survey investigated customer satisfaction of credit card issuers. In this article we'll examine American Express (NYSE:AXP). We'll primarily use the survey to assess the company's product and potential demand for that product. We'll cover the industry and we'll briefly discuss the financials.
American Express is number one in customer satisfaction, according to a survey conducted by J.D. Power and Associates. The survey included nearly 14,000 customers.
The survey asked customers about their experience with the issuer's terms, billing and payment process, rewards program, benefits and services, ability to resolve problems and accessibility.
Consumers said American Express did the best job in each of the categories. According to customers, American Express really outperformed other issuers in the areas of communicating with customers and offering attractive rewards.
If consumers are happy with the product they are likely to keep using it. Further, they are likely to recommend it to their friends. The demand prospects for American Express' service remain solid based on the evidence offered in the survey.
American Express is in the credit services industry. Its main competitors are Capital One Financial Corp. and Discover Financial Services. The credit card issuer operates in the financial sector.
The credit services industry is cyclical. When the economy is booming consumer confidence increases and people are more likely to borrow and spend. American Express is a mature company that operates primarily in mature markets, although, the company does benefit from sales in growth and less developed markets.
There is competition in the card services business, however, the customer satisfaction ranking of American Express suggests the threat of substitute products is less for AXP. The industry has high barriers to entry. Additionally, there is some rivalry as firms seek to offer the best rewards to attract and retain customers. The industry is concentrated with some pricing power.
American Express Financials
American Express has a price-earnings ratio of 13.34 and a forward price-earnings ratio of 12.01. Price-sales is 1.94 and price-book value is 3.36.
The debt-equity ratio is 3.09 and long-term debt to equity is 2.90. The dividend yield is 1.4 percent or about the same rate as the yield on 10-year U.S. Treasury securities.
Sales the past five years grew 3.11 percent annually while earnings grew 6.91 percent annually. The pace of earnings growth is expected to accelerate to 10.55 percent.
A key statistic for common equity investors is return-on-equity. AXP's return-on-equity is 26.5 percent. Also, the operating and profit margin are around 20 percent.
American Express is a leading brand and creates value for investors. When you look at the valuation and the financial performance the firm is a good investment. There is a chance that valuations will decline, however, any decline should be short-term in nature.
(Data Courtesy of Finviz.)
Disclaimer: This article is not meant to establish or continue an investment advisory relationship. Before investing, readers should consult their financial advisor. Christopher Grosvenor does not know your financial situation and ability to bear risk and thus his opinions may not be suitable for all investors.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.