American Express Company (NYSE: AXP) is a global financial services corporation known for its credit card, charge card, and travel-related services. It competes with other financial giants like Visa, Mastercard, and banks such as Goldman Sachs and Wells Fargo. The company's performance is often evaluated by comparing its financial metrics with these peers.
American Express has a Return on Invested Capital (ROIC) of 7.68% and a Weighted Average Cost of Capital (WACC) of 10.17%. This results in a ROIC to WACC ratio of 0.76, indicating that the company is not generating returns that exceed its cost of capital. This suggests inefficiency in capital utilization compared to its peers.
Visa Inc. (V) shows a strong performance with a ROIC of 28.34% and a WACC of 7.68%, resulting in a ROIC to WACC ratio of 3.69. This indicates that Visa is generating returns significantly above its cost of capital, showcasing efficient capital utilization.
Mastercard Incorporated (MA) leads the group with a ROIC of 42.97% and a WACC of 7.98%, achieving a ROIC to WACC ratio of 5.38. This highlights Mastercard's exceptional ability to generate returns well above its cost of capital, making it the most efficient among the peers analyzed.
In contrast, The Goldman Sachs Group, Inc. (GS) and Wells Fargo & Company (WFC) have lower ROIC to WACC ratios of 0.22 and 0.31, respectively. This indicates that these companies, like American Express, are not generating returns that exceed their cost of capital, suggesting room for improvement in capital efficiency.
