Amazon Stock Analysis (NASDAQ:AMZN)
Amazon Analysis Video
Amazon’s revenue has constantly climbed higher as the company is putting all its efforts to expand its topline. This has led to the creation of massive infrastructure causing Amazon’s assets to increase to over $65 billion. Amazon’s stock analysis highlights the contradiction in the exponential growth of its topline and its non-existent bottom line. After over two decades of operations many investors had started questioning if the zero profit business model of the company will allow it to survive in this heavily contested arena in the future.
Amazon.com, Inc. Stock Rating (2.8/5)
Should you buy AMZN stock?
- Amazon sales grew by 22.4% year on year in 2016 Q4.
- Revenue growth has been tremendous with a compounded annual growth of 23.1% over the last 5 years.
- The company has an operating cash flow which is 14.2 times the net income.
- Amazon has an attractive ROIC (Return on Invested Capital) of 16.5%
- The company has a healthy free cash flow margin of 19.8%.
Should you sell AMZN stock?
- Amazon had an unimpressive average operating margin of 3.1% during the Last Twelve Months (LTM).
- Amazon's LTM Net margins were poor at 1.7%.
- Amazon has a debt/equity ratio of 0.4, which is worse than the average in the Retail-Wholesale sector.
- Trading at a PE ratio of 172.2, AMZN stock is overvalued in comparison to industry average multiple of 18.4.
- The company is trading at a price to sales multiple of 3, which is overvalued in comparison to the Internet Commerce industry average multiple of 0.7.
Amazon’s price trend has reflected this debate which led to a massive fall of over 20% in the stock’s value in 2014. However, the stock has recovered as the Amazon Web Services has helped Amazon to establish a stable bottom line. Amazon stock price history shows that the stock has performed much better than its competitors since the financial recession. The company has crossed an annual revenue run rate of over $100 billion. Even at that scale the company continues to show a growth of over 20%. Amazon’s financial analysis also shows a lot of room for cost cutting, which should help the company to boost its profits.
Amazon PE ratio chart shows a high valuation. However, Given the strong growth in Amazon topline and the recent bottom line strength, Amazon stock should be able to outgrow its valuations. The overall revenue growth and market share are more important for investors. Amazon Web Service (AWS) is the market leader in its category albeit facing huge competitive pressure. Its e-commerce business is also more diversified with stronger infrastructure than other competitors. However, the future of the company will be based on how well it is able to withstand the competitive pressures on all flanks and the overall cost efficiency of its business model.