American Express vs PayPal Which Is a Better Investment?

American Express and PayPal are two leading companies in the financial services industry, providing payment solutions and services to millions of customers worldwide. Both companies have experienced significant growth in recent years, with American Express known for its premium credit card offerings and PayPal for its popular digital wallet platform. Investors looking to capitalize on the digital payment trend may be considering whether to invest in American Express or PayPal stocks. In this comparison, we will evaluate the strengths and weaknesses of each company to help investors make an informed decision.

American Express or PayPal?

When comparing American Express and PayPal, different investors may prioritize various metrics based on their investment strategies and goals. So, ask yourself what type of investor you are. This will guide you in determining which metrics are most important for your investment decision between American Express and PayPal.

Dividend Investors:

Dividend investors look for stable and growing income streams, using dividend metrics to assess potential investments. A company's dividend yield essentially measures the size of its dividend relative to the total market value of the company. American Express has a dividend yield of 0.89%, while PayPal has a dividend yield of -%. Beyond the yield itself, considering the growth and sustainability of these dividends is also crucial. American Express reports a 5-year dividend growth of 10.01% year and a payout ratio of 19.64%. On the other hand, PayPal reports a 5-year dividend growth of 0.00% year and a payout ratio of 0.00%.

Value Investors:

Value investors focus on financial metrics to determine a stock's intrinsic value compared to its market value. The Price-to-Earnings (P/E) Ratio links stock price to a company's earnings per share, with American Express P/E ratio at 21.62 and PayPal's P/E ratio at 20.35. Another crucial valuation metric is the Price-to-Book (P/B) Ratio, which compares stock price with book value per share. American Express P/B ratio is 7.20 while PayPal's P/B ratio is 4.47.

Growth Investors:

Growth investors prioritize metrics indicative of a company's expansion potential. Focusing on top-line growth, American Express has seen a 5-year revenue growth of 0.74%, while PayPal's is 1.07%. Return on Equity (ROE) measures how effectively a company uses equity investment to generate earnings, with American Express's ROE at 34.09% and PayPal's ROE at 21.46%.

Retail Investors:

Retail investors often consider stock affordability and company familiarity. For example, day low prices are $296.78 for American Express and $88.38 for PayPal. Over the past year, American Express's prices ranged from $167.77 to $307.82, with a yearly change of 83.48%. PayPal's prices fluctuated between $55.77 and $93.66, with a yearly change of 67.94%. Brand recognition also plays a role, as familiarity with a company can influence investment decisions.