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| | American Express Company
Description of the Business
America Express Company is a global payments and travel company.
Analysis of Competitors
Its competitors are:
- Bank Of Amerika
- Wells Fargo
- JP Morgan
- Citigroup
- Capital One
- Visa
- Mastercard
Competitive Advantages
As a financial organization it is difficult to differentiate from competitors. Banks are competing on price and services.
A very important critical success factor is risk management.
A bank can achieve lower prices (lower interest rates on loans) compared to competitors by having lower funding costs for
example because of deposits or high credit ratings. Another important differentiator is the perceived trust customers have in a bank.
A competitive advantage of AXP is that they have a strong market share of customers with strong credit ratings and corporate credit cards. Also a large part of their revenues is fee based.
Another competive advantage is their strong brand.
Financial Analysis
Their interest profit margin is more than 50%. However 70% of their earnings is fee based, making them revenues less volatile.
Their loans are mainly financed by long term debt. Funding from deposits is only about 10%. They have ample of cash ($15 billion).
It received $3.5 billion from the US government in exchange of preferred stock
Risks
The main short term risks are related to credit losses due to weakening economy. It is very difficult to predict how big these losses will be and whether AXP will need additional capital.
If AXP survives the credit crises it has huge future opportunities to grow profits and their business.
However in the short term the AXP stock has a high risk rating due to the economic uncertainty.
Management Team
AXP has an experienced management team.
Valuation Calculation
The valuation of AXP is highly uncertain because of the credit crisis and uncertainties about future losses.
We believe in the long term MI can earn $3,5 a share, which gives a cash flow value of $35.
However because of the high risks we assign a negativ |
