Capital One vs. AmEx: Which Credit Card Stock Offers Better Upside?

Capital One Financial Corporation COF and American Express Company AXP are both leading consumer finance companies that have credit cards as their central profit engine, generating a large part of their revenues from interest income, transaction fees and customer spending. Despite having different operating models, both share important similarities in their core businesses.Each has built nationally recognized brands and large cardholder bases, investing heavily in reward programs, marketing and customer engagement to drive spend and retention. Also, data analytics play a critical role for both firms in underwriting, fraud prevention and personalizing offers.AmEx runs a closed-loop network, acting as both card issuer and payment processor, which allows it to earn a larger share of transaction economics through discount revenue and annual fees. In contrast, Capital One issues cards on open-loop networks and targets a broader range of consumers, from prime to near-prime.Now, the question arises: which of the two companies, AXP or COF, offers better upside potential in the current operating environment? In order to understand this, let us dive deeper and closely compare the fundamentals and growth prospects of the two stocks.The Case for Capital OneCOF’s key strength lies in its data-driven, digital-first business model, which enables efficient customer acquisition, disciplined underwriting and scalable growth in its credit card franchise. In a strategic move to enhance its market position, Capital One acquired Discover Financial Services in May 2025 in a $35.3-billion all-stock deal. This deal made COF the largest U.S. credit card issuer by balances and significantly expanded its payment network capabilities.The deal gave Capital One control of Discover Financial’s payments network — one of only four in the United States — generating greater revenues from interchange fees and offering strategic independence from Visa and Mastercard.Over the years, COF has pursued a strategic inorganic growth strategy to diversify its offerings and expand its market presence. Some of the notable ones are ING Direct USA, HSBC's U.S. Credit Card Portfolio and TripleTree. These acquisitions have been instrumental in transforming Capital One from a monoline credit card issuer into a diversified financial services firm with a significant presence in retail banking, commercial lending and digital banking platforms.Though the company’s revenues declined marginally in 2020, the metric witnessed a five-year (2019-2024) compound annual growth rate (CAGR) of 6.5%. In the same time frame, its net loans held for investment recorded a CAGR of 4.3%. The upward momentum continued for both metrics in the first nine months of 2025. Revenue prospects look encouraging, given the company’s solid credit card and online banking businesses, Discover Financial's buyout and decent loan demand.Revenue Trend Image Source: Zacks Investment Research Despite the three interest-rate cuts in 2025, along with expectations of more in 2026, Capital One’s net interest income (NII) and net interest margin (NIM) are expected to keep benefiting from robust demand for credit card loans. The company’s NII witnessed a CAGR of 6% over the five years ended 2024. Also, NIM expanded to 6.88% in 2024 from 6.63% in 2023. The uptrend for NII and NIM continued in the first nine months of 2025. Thus, solid demand for credit card loans and Capital One’s efforts to scale its business are expected to continue to drive NII and NIM.Further, COF, which primarily serves customers in the United States, Canada and the U.K., boasts a solid balance sheet position. As of Sept. 30, 2025, it had total debt (securitized debt obligations plus other debt) worth $51.5 billion and total cash and cash equivalents of $55.3 billion.Though the company slashed its quarterly dividend 75% in 2020 based on the Federal Reserve’s requirements, it restored it to 40 cents per share in the first quarter of 2021. In July 2021, the company hiked the same by 50% to 60 cents per share and it raised its quarterly dividend 33.3% in November 2025 to 80 cents.Capital One also has a share repurchase plan in place. In October 2025, its board of directors authorized the repurchase of up to $16 billion of shares, which began on Oct. 21. Given its earnings strength and solid liquidity position, the company is expected to keep enhancing shareholder value through efficient capital distributions.The Case for American ExpressAXP remains a best-in-class operator within traditional payments, benefiting from a loyal, high-spending customer base and strong brand equity. In its last reported quarter, AmEx delivered 11% revenue growth, supported by resilient travel and entertainment spending and continued growth in card fees and interest income. Its premium positioning and affluent customer mix have historically insulated it from softer spending cycles.The company grows revenues through new product launches, enhancements to existing offerings, price modifications and strategic alliances. Revenues, net of interest expenses, witnessed a three-year (ended 2024) CAGR of 15.9%, with the uptrend continuing in the first nine months of 2025.AXP expects 2025 revenues to rise 9-10% from the 2024 base of $65.9 billion, with long-term revenue growth expected to exceed 10%.Revenue Trend Image Source: Zacks Investment Research A focus on growing Millennials and Gen-Z consumers, who tend to spend more than their older counterparts, is expected to position AmEx for the long run. The acquisition of Kabbage and partnership with UPS allowed AmEx to deepen its small business offerings. Through Kabbage Funding, the company provides lines of credit between $1,000 and $150,000, while Kabbage Payments streamlines card acceptance. These tools help AmEx support merchants’ cash flow management, broadening its presence in the SMB market.AXP has formed key alliances with Delta, Hilton, Amazon and Point.me, strengthening customer loyalty and brand presence. Recent acquisitions like Tock and Rooam expand AmEx’s offerings in high-end dining and venue reservations. It also completed the acquisition of Center ID Corp in April 2025.Financially, AmEx is on a solid footing. As of Sept. 30, 2025, the company had $54.7 billion in cash and cash equivalents against just $1.4 billion in short-term debt. It generated $15.4 billion from operating cash flow in the first nine months of 2025, which soared 85.7% from the prior-year comparable period.In 2024, AXP returned $7.9 billion to shareholders through dividends and buybacks. In third-quarter 2025, it returned $2.9 billion. In March 2025, the company raised its quarterly dividend 17% to 82 cents per share.How Do Estimates Compare for COF & AXP?The Zacks Consensus Estimate for Capital One’s 2025 and 2026 revenues is pegged at $53.26 billion and $62.55 billion, respectively, indicating year-over-year growth rates of 36.2% and 17.5%.The consensus estimate for 2025 earnings indicates year-over-year growth of 41.6%. The 2026 earnings estimate suggests a rise of 1.5%. Earnings estimates for both years have been revised higher over the past 60 days.Earnings Estimate Revision Image Source: Zacks Investment Research On the contrary, the consensus estimate for AXP’s 2025 and 2026 revenues is $72.11 billion and $78.10 billion, suggesting year-over-year growth of 9.3% and 8.3%, respectively.The consensus estimates for AmEx’s 2025 and 2026 earnings suggest growth rates of 15.4% and 14%, respectively. Earnings estimate for 2025 has been unchanged in the past 60 days. The earnings estimate for 2026 has been revised upward.Earnings Estimate Revision Image Source: Zacks Investment Research Capital One & AmEx: Price Performance, Valuation & Other ComparisonsIn the past three months, COF shares have gained 21.7%, while the AXP stock has rallied 18.4%. This shows that investors are more bullish on the Capital One stock.3-Month Price Performance Image Source: Zacks Investment Research Valuation-wise, COF is currently trading at a 12-month forward price-to-earnings (P/E) of 12.81X, lower than AXP’s P/E (F12M) of 21.77X. This shows that Capital One is relatively less expensive than AmEx.P/E (F12M) Image Source: Zacks Investment Research AmEx’s return on equity (ROE) of 33.41% is way above Capital One’s 10.94%. This reflects AXP’s efficient use of shareholder funds to generate profits.ROE Image Source: Zacks Investment Research COF or AXP: Which Stock Is a Better Investment Option?American Express continues to demonstrate strength through its premium client base, solid financials and strategic investments in travel, dining and younger demographics. A notably higher ROE than COF reflects more efficient use of capital and a premium positioning in the market. AXP’s premium valuation is justified by its robust brand and fee income model tied to affluent cardholders. In contrast, Capital One appears more attractively valued, with a lower P/E ratio. A major catalyst for COF is its acquisition of Discover Financial, which is expected to broaden its payment network footprint, potentially driving future revenue and synergies. Additionally, Capital One’s strong margins and diversified lending business (including retail banking) provide stability and income.Ultimately, while American Express may be better suited for investors seeking long-term growth and premium brand strength, Capital One could appeal more to value-oriented investors looking for a cheaper entry and possibly stronger near-term price appreciation.Currently, Capital One and American Express both carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.#1 Semiconductor Stock to Buy (Not NVDA)The incredible demand for data is fueling the market's next digital gold rush. As data centers continue to be built and constantly upgraded, the companies that provide the hardware for these behemoths will become the NVIDIAs of tomorrow.One under-the-radar chipmaker is uniquely positioned to take advantage of the next growth stage of this market. It specializes in semiconductor products that titans like NVIDIA don't build. It's just beginning to enter the spotlight, which is exactly where you want to be.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Capital One Financial Corporation (COF): Free Stock Analysis Report American Express Company (AXP): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks