- Amazon's stock has returned over 1000% over 10 years.
- Amazon's revenue growth has been exceptional and valuations aren't expensive.
- Amazon's lack of profitability even after 20 years as a public company, raises concerns.
Nearly a year ago, we dug deeper to see what drives Amazon's high PE ratio, and we found that the company's incremental spends at the time weren't really leading to a proportionate increase in revenue. We also highlighted the risks to cash flows arising from the company's deteriorating trends in payables and inventory. Those risks of course, continue to remain as we noted in our recent coverage about Amazon's falling free cash flows.
While profitability, or the lack of it makes us wary of this stock, that trend isn't likely to change very quickly. As Competition mounts for Amazon, the company could find it harder to generate sizeable profits. Further, Amazon's push in India and China is unlikely to help the cause, as the company will be looking to gain market share and compete with local players in these highly competitive markets.
Amazon's revenue growth has been commendable without doubt. However, Amazon fundamentals indicate problems ahead, as increasing debt and interest burden could continue to put pressure on margins, amidst slowing growth. You can also see our coverage of Amazon earnings for Q4 2014 and our Amazon stock analysis, to see more fundamental aspects of the stock, like its return on equity, free cash flow margins, daily updated valuations and more.
Hello and welcome to this videograph about Amazon (NASDAQ:AMZN).
Amazon Stock Performance
Amazon's stock has had a stellar run over the last decade, gaining by, an eye-popping 1014%. Amazon's fortunes on wall street stand in stark contrast to those of eBay's, With ebay having returned just over 60% in the last decade.
Even after its dream run, Amazon valuations aren't too expensive, with the stock trading at under 2 times 2014 sales. Should you buy in? We think not, and here's why.
Amazon Revenue Growth Over 10 Years
To have generated the kind of returns that it has, Amazon has to have done something right, and it has. Over the last decade, Amazon has generated a whopping 384 billion dollars in revenue, growing at a compounded annual growth rate of 26.5%.
Amazon Profitability: The Chink In The Armour
That said, when it comes to profitability, Amazon's performance has been rather disappointing. Over the last decade, in terms of net profits, Amazon has earned just about a fourth of eBay's earnings, and less than Alibaba's profits in twenty fourteen alone.
Amazon Stock Analysis: Should You Invest In Amazon?
With high growth companies, the basic premise is that they will become profitable eventually. But in the case of Amazon, which went public nearly 20 years ago, the question is how long is long enough? At least in terms of profitability, Amazon has very little to show for it's 20 years as a public company, raising the question, How long can Amazon defy gravity?
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