Financial Analysis of American Express and Visa

Running head: FINANCE
Finance
Name of the student
Name of the university
Author note

1
FINANCE
Table of Contents
Company background................................................................................................................2
Industry outlook.........................................................................................................................2
Analyst’s forecasts.....................................................................................................................2
Revenue and income trend.........................................................................................................3
Financial ratio analysis...............................................................................................................3
Altman’s Z score........................................................................................................................4
Ethical concerns.........................................................................................................................5
Ratio analysis and recommendation...........................................................................................5
Reference....................................................................................................................................6

2
FINANCE
Company background
American Express Company that is incorporated on 10th June 1965 provides global
services along with its subsidiaries. Principal Service and products of the company are
charges, travel related services and products related to credit cards (Americanexpress.com,
2018). On the other hand, history of Visa began in the year 1958 when the Bank of America
started Bank America program in Fresno, Calif. Though the company originally planned for
providing the service in state basis only, over the time period various banks licenses their
card system from the Bank of America (Investor.visa.com, 2018).
Industry outlook
If the industry look of American Express and Visa is considered it can be stated that
US card processing industry is expected to see the shakeup among the 4 incumbents as Amex
is seemed to be poised to push ahead of the MasterCard for becoming 2nd largest credit card
processor (Americanexpress.com, 2018). On the other hand, Visa remained undisputed leader
in the market with the market share of 53% in quarter 1 of 2018.
Analyst’s forecasts
As per the analysts and management of Amex it is forecasted that it will hit high
range of full year earnings for $ 6.90 to $ 7.30. If $ 7.20 is used as base point it will give
Amex the forward P/E ratio of 13.7. Further, it is expected that the company will pay $ 0.35
as quarterly dividend that will lead to dividend yield of 1.42% and the payout ratio of 19.4%
only. On the other hand, based on the last 12 month’s EPS of $ 3.95 Visa is valued with P/E
ratio of 32 at present. Considering the quarterly dividend of $ 0.21 it will lead to dividend
yield of 0.65% only (Investor.visa.com, 2018).