Is It a Good Time to Buy American Express?

Evaluating American Express: Is It Worth Buying?

American Express (NYSE: AXP) is a notable part of Warren Buffett’s Berkshire Hathaway portfolio. Just the fact that Buffett backs it makes some investors interested in snagging shares.

But it’s important to think beyond that. We need to consider the company itself and its current valuation. So, is American Express a solid buy at this moment?

American Express is significant in the finance sector, primarily serving as a payment processor. Its logo is widespread on credit cards, both at retail outlets and online. Each transaction brings in fee revenue, and the company also issues its own cards—adding to its revenue directly from customers.

What sets American Express apart from its competitors is its focus on wealthier customers. Individuals in this demographic tend to withstand economic downturns better, maintaining their spending habits even in tough times. This generally means that American Express’s business performs well, particularly during recessions and other economic uncertainties.

This year, 2025, has been quite uncertain, with various challenges like tariff disputes and stock market corrections dominating the news. American Express’s stock price has mirrored the ups and downs of the S&P 500. After a shaky start, the stock recovered as investors regained confidence.

Interestingly, American Express’s price fluctuations have been more pronounced than the broader market’s. This could signal that there’s a potential for quicker recovery—but it also raises some red flags.

On the downside, high volatility might indicate that investors have been overly optimistic, pushing prices to unrealistic levels earlier in the year. The recent dip could signal a return to more rational expectations.

Looking at traditional metrics, American Express does appear overpriced. The price-to-sales ratio stands at about 3.1, which is higher than the five-year average of 2.6. The price-to-earnings (P/E) ratio is around 20.5, slightly above the long-term average of 19. Meanwhile, the price-to-book value ratio is at 6.6, compared to an average of 5 over the past five years.

These figures collectively suggest that American Express is costly at the moment. Supporting this view is the dividend yield, which typically decreases as stock prices rise. Currently, the yield is around 1.1%, lower than the already modest 1.3% from the S&P 500, and it’s nearing the bottom of the decade’s range.

In short, American Express seems quite expensive today.

There’s no doubt why Warren Buffett has held onto American Express for years; it’s a solid business with distinctly favorable qualities. However, as Buffett’s mentor Benjamin Graham famously noted, sometimes a stock can become costly. Right now, it seems American Express fits that description.