American Express Has Cut Its Share Count by 27% Since 2016. Here's What That Did for the Stock.
Investors have benefited from market-thumping returns in the last decade.
American Express (AXP) has significantly reduced its share count by 27% over the past decade, leading to a substantial boost in the stock's performance. From Q3 2016 to Q3 2026, the financial institution trimmed its outstanding shares by 26.8%. This strategy has proven highly effective, as American Express has delivered a total return of 471% during this period, outperforming the S&P 500 index.
A major factor behind this success has been the company's focus on profit growth. Diluted earnings per share (EPS) have risen by an impressive 352% over the same timeframe. Notably, this growth has outpaced net income, which increased by 228% over the last decade. This demonstrates the company's fundamental strength and ability to generate robust earnings.
One of the primary mechanisms American Express uses to enhance shareholder value is through stock buybacks. These repurchases increase the per-share profits of existing investors, effectively boosting their ownership stakes over time. This approach is a key component of the management team's capital allocation strategy.
While the business's emphasis on share repurchases is essential, it is not the sole determinant of its value. American Express has built a formidable position in the credit card market, backed by a strong brand that appeals to affluent customers and a powerful network effect that creates a positive feedback loop, enhancing value for both consumers and merchants. These competitive advantages safeguard the company's market leadership.
Currently, American Express trades at a forward price-to-earnings ratio of 16.2, which the author considers reasonable. Although not necessarily cheap or expensive, the company's management aims for a mid-teens annualized EPS growth rate in the long run. If this target is achieved, it would provide a durable tailwind for the stock price.
Overall, American Express is a high-quality company worth considering for investment. Its strong market position, consistent profit growth, and focus on returning capital to shareholders through share buybacks make it an attractive option for long-term investors.
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