American Express Company (AXP) and Discover financial services (DFS) are well-known financial services companies that offer credit cards worldwide. AXP provides payment and credit card products and travel-related services to consumers and businesses around the world. Its products and services also include merchant acquisition and processing, point-of-sale marketing, fraud prevention services, and the design and operation of customer loyalty programs. By comparison, DFS operates as a digital banking and payments company around the world. It issues credit cards, offers student and personal loans and savings products, and operates ATM networks.

Rising consumer spending and economic recovery are leading to an increase in credit card transactions. In addition, a growing preference for digital transactions is prompting credit card companies to collaborate with major online platforms to expand their user base. The global credit card market is expected to grow by a 1.1% CAGR to 107.69 billion dollars by 2025. Thus, AXP and DFS should benefit from it.

While AXP shares have gained 48.7% in price over the past year, DFS has jumped 107.5%. DFS is a clear winner with price gains of 17.7% over AXP’s 7.4% returns in terms of performance over the past six months as well. But which of these titles is the best choice now? Let’s find out.

Latest developments

On July 1, 2021, AXP launched an updated US American Express Consumer Platinum Card that offers even more value to card members with additional and extended benefits and services for travel and everyday life in the food and beverage industries, wellness, retail and entertainment. The company expects more customers to sign up for Platinum membership in the coming months.

On July 13, 2021, DFS and SIBS MB, a SIBS group company that handles cash withdrawals and electronic purchases at ATMs and outlets in the MB network, signed a strategic agreement that gives Discover, Diners Club International and network alliance cardholders the possibility of using their cards on the SIBS MB network at merchants and ATMs in Portugal and abroad. Alliances with strong regional payment networks will allow DSF to offer a better user experience and extend its reach.

Recent financial results

For its fiscal second quarter, ended June 30, 2021, AXP’s total revenue grew 33.5% year-over-year to $ 10.24 billion. The company’s pre-tax profit was $ 5.93 billion for the quarter, up 452.4% from the same period a year earlier. While its net profit increased 787.2% year-on-year to $ 2.28 billion, its EPS increased 865.5% to $ 2.80. As of June 27, 2021, the company had $ 96.21 million in cash and cash equivalents.

For its fiscal second quarter, ended June 30, 2021, DFS ‘total revenue increased 34.4% year-on-year to $ 3.58 billion. The company’s pre-tax profit was $ 2.22 billion, down from a loss of $ 461 million in the prior year period. DFS net income was $ 1.70 billion, compared to a net loss of $ 368 million in the prior year period. Its EPS stood at $ 5.55 for the quarter, down from a loss of $ 1.20 per share in the period last year. The company had $ 15.45 billion in cash and cash equivalents as of June 30, 2021.

Past and expected financial performance

AXP’s revenue and net profit grew at a CAGR of 2.6% and 27.3%, respectively, over the past three years. The company’s EPS has grown at a CAGR of 31.2% over the past three years.

Analysts expect AXP’s EPS to grow 33.1% year-on-year in the current quarter ending September 30, 2021, 134.3% for the current year, and 6. 3% next year. Its revenue is expected to grow 20.7% year-over-year in the current quarter, 13.4% for the current year and 14% next year. The stock’s EPS is expected to grow at a rate of 41% over the next five years.