American Express Outperforms Costco, Better Buy for 2026
American Express (AXP) and Costco Wholesale (COST) have consistently outperformed the S&P 500 (^GSPC) over the past three, five, and ten years. Despite their strong performance, American Express is considered a better buy for 2026, trading at 22.3 times forward earnings compared to Costco's 47.
American Express' robust risk management is evident in its net write-off rate of around 2%, indicating effective control over defaults. The company has expanded its network by adding 13 million new proprietary cards in 2024, marking 26 consecutive years of double-digit net growth in card fees. This growth is largely driven by millennials and Gen Zers, who are the fastest-growing age groups in terms of new accounts and spending.
American Express' strong risk management, consistent growth in card fees, and increasing dividend make it an attractive investment option for 2026. While Costco's customer loyalty and operating margin are commendable, American Express' lower valuation and higher dividend yield give it the edge.
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