Shares of American Express (AXP 1.50%) stock shot up 58.4% in 2024, according to data from S&P Global Market Intelligence. The credit card and banking giant had close to everything working in its favor last year, as the company posted strong earnings growth and saw its price-to-earnings ratio (P/E) expand. The Warren Buffett favorite now has a market cap of over $200 billion, making it one of the largest financial institutions in the world.
Here is why American Express stock marched higher in 2024.
Steady earnings growth and multiple expansion
Earnings per share (EPS) hit $13.59 over the past 12 months, up from $11.21 in 2023. Total spending across its credit card network is growing 6% year over year, while net card fees and net interest income are growing in the double digits. Net write-offs on its loans declined in the last few quarters and are still below pre-pandemic levels. Add in some steady share repurchases, and you can see why American Express's EPS grew so much in 2024.
Another factor for its stock returns was multiple expansion. The stock's P/E went from around 17 at the start of 2024 to 22.28, as of this writing, which is an almost 31% stock gain just from the stock market assigning it a more expensive P/E ratio. While this can't be expected to repeat every year, investors are getting optimistic on American Express stock for a reason: The financials are humming along just swimmingly.
NYSE: AXP
Key Data Points
More growth is coming in the years ahead
Outside its financials, American Express's other key metrics performed quite well in 2024.
The company added over 3 million new credit cards to its network in the first three quarters of 2024 (we don't have Q4 numbers yet). A lot of these cards are coming from millennial and Gen Z spenders, who can grow their usage with American Express over time. This gives the company a long runway to grow in the years to come. Investors in American Express should watch this metric closely, as it indicates what future growth can be for the credit card giant.
Warren Buffett has held shares of American Express for decades for a reason. This is a high-quality business with a fantastic brand. It might not be as cheap as the start of 2024, but investors will do well to hold American Express stock for the long haul.
