Blue chip stocks are known for their stability, longevity, and consistent performance. These prominent, high-quality companies have stood the test of time, delivering solid returns for investors.

American Express (AXP -0.30%) is one blue chip with a track record of success, and you can buy it today at a discount to its competitors. The payment company has displayed resilience during economic downturns thanks to its high-end customer base, and it's an intriguing opportunity for investors looking to add a stock that can provide stability and growth. Here's why.

American Express' strong brand attracts high-end customers

American Express provides credit cards and processes payments worldwide for its customers. The company is known for its high-end credit card products, which attract a premium customer base.

Last year, the company revamped its Platinum card, which carries an annual fee of $695, by adding thousands of points for existing customers, travel benefits, and forging other partnerships to save its customers money.

Its premium brand is one reason Berkshire Hathaway is the company's largest stockholder, owning 20% of its shares outstanding. Berkshire Chief Executive Officer Warren Buffett is a huge fan of companies with distinctive brands. In an interview with Bloomberg last year, Buffett said, "I could create another shoe store, I could create another business publication, I could do all kinds of things with hundreds of billions of dollars, but I can't put in the minds of people what is in their minds about American Express." 

Its solid growth spans decades

American Express makes money in a few ways, but its most significant revenue source is discount revenue -- or the fees it collects from merchants for taking its card. Last year's discount revenue made up 58% of total revenue. It also earns fees and interest income on loans to customers. 

A cashier at a coffee shop takes a mobile payment from a customer.

Image source: Getty Images.

American Express' growth has been impressive during the past two decades, with its revenue per share and free cash flow per share growing 10.2% and 10.7% annually, respectively. It maintained strong growth last year as revenue jumped 22%. Competitors Visa and Mastercard saw revenue growth of 18.5% and 17.8%, respectively, during the same period. 

One area where it shined was with new customer acquisitions. Last year, it added 12.5 million new cards, with 70% of those on fee-based products. It did a stellar job of attracting younger customers, with millennials and Gen Z representing 60% of its new cards. 

Should you buy this blue chip bargain?

American Express trades at a discount to its peers Visa and Mastercard because it extends credit to customers through its cards and other loans, while Visa and Mastercard are purely payment processors that don't take on this credit risk.

But it's hard to ignore the discount on American Express versus its peers. It trades at a price-to-earnings (P/E) ratio of 16.5, while Visa's and Mastercard's P/E ratios are 32.3 and 36.2, respectively.

Because it does take on loans, investors must consider credit risk before investing in American Express. The good news is that its credit quality is quite good because of its premium customer base. In last year's fourth quarter, its net write-offs were 1.1% of total loans, while 1% of member loans were 30 days past due, below pre-pandemic levels. 

Two charts show American Express's net write-offs and loans 30+ days past two over five quarters, compared to pre-pandemic levels.

Image source: American Express.

American Express has established itself as a luxury brand and has done an excellent job capitalizing on this and attracting a younger customer base last year.

Its premium customer base can help it ride out economic turbulence, whether it's persistent elevated inflation or even a recession, should one occur. That makes this Dow Jones stock a solid blue chip to buy today.