Is American Express Stock a Millionaire Maker?

American Express (NYSE: AXP) has been a winning investment. In the past 30 years, the share price has climbed 3,090% (as of Jan. 8). Including dividends, the total return comes out to 4,570%. Had you invested $22,000 in early January 1996, you'd have $1 million today. Historically, American Express has been a millionaire-maker stock. But can the financial stock keep this up in the future?

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American Express's competitive strengths

Before thinking about the money-making potential of any investment, investors should question if there are durable competitive strengths. These make up a company's economic moat. And if these are present, it's a good sign that this is a high-quality business worth digging deeper into a bit. American Express fits the bill here as showcased by the stock's remarkable past performance. There are two key aspects of its moat that investors should be familiar with now.

The first is that the business possesses a network effect. American Express has a business model partly like Visa or Mastercard, as it runs the payment platform that connects 160 million merchant locations with 151 million active cards. This creates a two-sided ecosystem that sees its value proposition improve as the number of stakeholders grows. Merchants have more customers to target. And consumers will have more places to spend their money. This is a positive feedback loop.

Another part of the American Express moat is the company's brand strength. The company is viewed as having a premium position in the financial services market. This comes down to its strategy of targeting an affluent customer base that has greater spending power than average consumers. Consequently, Amex has industry-leading net charge-off rates.

The credits cards also have proven pricing power as exemplified by the company's ability to charge higher fees on its products over time. The average fee per card increased by 205% between the third quarters of 2015 and 2025 (ended Sept. 30). Within the past 18 months, American Express hiked the membership dues on both its Gold and Platinum cards, but the number of cards active keeps growing.

Competition is certainly nothing to overlook. JPMorgan Chase and Capital One, for instance, are two well-known credit card issuers. But the economic moat that American Express has developed supports its staying power.

Earnings are set to be higher in the future

American Express dates its founding all the way back to 1850. Despite being around this long and operating in a relatively mature industry, there is still significant growth potential here. Besides stealing market share from rivals, the business benefits from economic growth and increasing spending activity. And the ongoing prevalence of cashless transactions also provides a boost.

In the past decade, revenue (net of interest expense) has climbed at a compound annual rate of 8.4%. This has helped drive net income 129% higher during the same period of time. American Express isn't going to turn heads with monster gains, but the growth is solid.

In January 2025, management revealed financial goals, calling for revenue and earnings per share (EPS) to rise at compound annual rates of more than 10% and mid-teens percentages, respectively, over the long run. This looks like a reasonable forecast.

Shares are expensive

This is a stock that every long-term investor, especially those who want to own high-quality companies, should pay attention to as a potential investment. However, I don't view American Express as a smart buying opportunity today. The valuation is steep. Shares trade at a price-to-earnings (P/E) ratio of 25.7, which is significantly higher than the 10-year trailing average.

Let's say the market presented investors with a chance to buy the stock at a more attractive P/E multiple of 15. At this entry point, Amex would definitely look like a smart buying opportunity. But it's not going to be a millionaire-maker going forward. Investors shouldn't bank on any individual stock falling into this category.

JPMorgan Chase is an advertising partner of Motley Fool Money. American Express is an advertising partner of Motley Fool Money. Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase, Mastercard, and Visa. The Motley Fool recommends Capital One Financial. The Motley Fool has a disclosure policy.