American Express (AXP) shares have slid 15% this year, pulling its price-to-earnings ratio under 20 and prompting a familiar question on Wall Street: has a classic Buffett-style opportunity quietly opened up?
The stock now sits roughly 18% below its all-time high, even after delivering a 131% total return over the past five years. For value investors, that kind of disconnect between price and underlying performance is exactly what a margin of safety looks like — but not necessarily for the reasons a simple P/E screen would suggest.
At 19.6 times earnings, the valuation is hardly stretched. In fact, it sits squarely in line with the credit-card giant’s three-, five- and ten-year averages. It is neither expensive nor an obvious, deep-value bargain. However, Warren Buffett’s most famous purchases rarely occurred when multiples simply looked cheap on a historical chart. They happened when a company’s internal compounding engine was accelerating faster than the market’s static multiple implied — and that is precisely the story Amex delivered in its latest quarter.
First-quarter net revenue climbed 11% year-on-year, while diluted earnings per share surged 18% to $4.28, sailing past management’s 10% growth target. Just as critically, the quality of that growth bolsters the bull case. Luxury spending by card members jumped 18%, defying the broader pressure on mass-market wallets. The firm added 3.1 million new accounts, with Millennials and Gen-Z making up 66% of them and 73% opting for fee-based cards. CFO Christophe Le Caillec highlighted that the spending uptick on the flagship Platinum card is being fueled primarily by existing members deepening their relationship, not merely by new sign-ups — a strong signal of loyalty in an uncertain economy.
If the business engine is humming, why has the stock fallen? The answer lies at the heart of the bull case. Despite the first-quarter beat, management deliberately chose not to raise full-year guidance. Instead, it is pouring the entire outperformance-driven profit surplus back into the ecosystem — expanding its premium hotel and resort programme, and releasing tools such as the Agentic Commerce Experience developer kit to embed payments into partner platforms. Short-term-focused traders interpreted the move as a dampened near-term earnings trajectory. Long-term shareholders will recognise it as the kind of moat-widening capital allocation that justified Berkshire Hathaway’s multi-decade commitment to the name.
This is where Buffett’s margin-of-safety framework gets interesting. A crude screen might argue that a P/E of 15 provides an obvious cushion, while 20 leaves little room for error. Yet the real safety buffer lies less in the printed multiple and more in the exclusivity of the business model. So long as the two-sided network connecting merchants with high-spending cardholders remains intact, and so long as Amex continues to lead the industry in credit performance through every cycle, the compounding of intrinsic value will quickly close the gap implied by a “not-obviously-cheap” P/E in the high teens.
The stock’s pullback has been amplified by twin fears — that elevated oil prices could dent travel spending, and that the AI frenzy is draining liquidity from established blue chips. But that rotation is precisely what creates a window for new investors, especially those who may have been over-concentrated in high-growth tech names, to add durable, balance-sheet-strengthening assets.
For those fixated on the next quarterly print, American Express at under 20 times earnings may appear to be stuck in a dull, sideways range. For anyone prepared to measure returns over five or ten years, however, the market’s current bout of anxiety looks less like a warning siren and more like the crack of a starting gun.
