American Express (AXP) returned 471 percent to shareholders over the past decade, significantly outpacing the S&P 500. But the composition of that return matters to your investment thesis.
From Q3 2016 to Q3 2026, AXP reduced outstanding shares by 26.8 percent through repurchases. Diluted EPS surged 352 percent over that same period. Net income, however, grew only 228 percent. The gap—124 percentage points—is pure share count reduction, not earnings growth.
This is not a criticism of AXP's capital allocation. It is arithmetic. Each buyback concentrates profits across fewer shares, boosting per-share metrics mechanically. Investors must separate organic earnings power from financial engineering.
AXP's competitive moat is genuine. The company commands pricing power with affluent cardholders and operates a network that improves with scale—more cardholders attract more merchants, and vice versa. The brand attracts high-value customers and supports premium fees.
Management targets mid-teens annualized EPS growth. If AXP delivers that pace from here, the stock has upside from its current 16.2x forward P/E—a fair valuation, not a bargain. Buybacks will continue to boost per-share results, but watch whether underlying net income actually accelerates or merely treads water while repurchases do the heavy lifting.
The investment case hinges on whether AXP can grow operating profits faster than it shrinks share count. That is the only way EPS growth sustains a re-rating.
