Credit card king American Express (AXP -0.55%) released an excellent first-quarter earnings report last week that demonstrates a sustained recovery from the pandemic and strong consumer satisfaction. It's a dominant player in its field, and has the tools to keep up its momentum.

SoFi Technologies (SOFI -0.77%) is a new player in the financial industry with a bit of a different focus, targeting student loans and offering other credit products. It's posting high growth, but it's far from posting a profit. Which of these is the better buy today? 

A shopper using an American Express card to pay at a store.

Image source: American Express.

Adding to its advantage

American Express struggled through the beginning of the pandemic with major revenue declines, but in a show of immense strength, it remained profitable throughout.

In the first quarter of 2022, sales galloped 29% ahead of 2021 first-quarter revenue to $11.8 billion, completely erasing pandemic declines. This surge was fueled by cardmember spending, which reached record monthly volume in March. Earnings per share (EPS) were a penny less than last year because of a large decrease in provisions for losses in the year-earlier period. Management affirmed a revenue goal of 18% to 20% growth for the full year.

American Express has decades of data and experience that it puts to work to assess precisely what it needs to do to engage customers, and that's how it can so effectively manage its business under both adverse and hospitable circumstances. Chief Executive Officer Stephen Squeri spoke about the company's investments in areas critical to long-term growth, which include customer acquisition, engagement, and retention. The company has been working hard to attract a younger demographic, and that's paying off as a new cohort of shoppers is exposed to the benefits of holding an American Express card. For example, in the first quarter, nearly half of Gen-Z and Millennial cardholders of the Consumer Platinum card -- which got a recent refresh to target these group -- engaged with one of its benefits. That's not only good news for the current quarter, but it portends long-term success if American Express can maintain its historically high retention rates.

High growth, high losses

High growth and losses are almost the definition of a growth stock. While on occasion investors will find a high-growth company that's already profitable when it hits the markets, more typically companies that are posting high growth are investing in developing their businesses and absorbing losses while they scale. That's where SoFi is right now.

The fintech newcomer is basically a personal finance app that's focused on credit products, but it also offers investing, banking, credit cards, and insurance products. It began with student loan refinancing, which is still its core product. It has grown rapidly -- graduates and others are attracted to its easy-to-understand and use model, as well as its mission to help its users become financially responsible.

In the fourth quarter, the number of new members increased 87% over the prior year to 3.5 million, which was a 39% larger increase than in the third quarter. New products increased 105% year-over-year, and they were heavily skewed toward financial products rather than credit products. Fourth-quarter revenue increased 67%, and full-year revenue increased 74% year-over-year to a record $1 billion.

One negative that has developed since the fourth-quarter report was a cut in expected revenue and earnings. The company's student loan book had expanded in the fourth quarter in anticipation of the student loan moratorium ending, but that has been pushed off from May 1 to Aug 31. Management lowered its projection for revenue for 2022 from $1.57 billion to $1.47 billion, and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) from $180 million to $100 million. However, that doesn't reflect the overall success and long-term opportunities of the business.

As great as SoFi sounds, it's posting huge losses -- $111 million in the fourth quarter, a 34% increase over last year -- with no end in sight.

The better buy in financial services

American Express and SoFi Technologies are both great companies with lots in store for the future. American Express stock is up about 10% over the past year, versus a 1% decline for the S&P 500 in the same period. It's also trading at a dirt-cheap valuation of 17 times trailing 12-month earnings.

SoFi stock, on the other hand, is down 65% over the past year, and even at this price, it trades at more than five times sales, which is historically low for the relative newcomer.

It might be time for risk-tolerant investors to take a chance on SoFi. But considering the economic environment, American Express gets my recommendation as the better buy today because of its fantastic track record and cheap valuation.