Amazon Stock Analysis, Valuation (NASDAQ:AMZN)

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$955.1 $9.55 (0.99%) AMZN stock closing price Sep 22, 2017 (Closing)
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Amazon
Updated on : Sep 22, 2017
previous close
AMZN 955.1 (0%)
S&P 500 2502.2 (0%)
Closing Price On: Sep 22, 2017
stock rating
RATING: ★★★★★★★★★★ (0/5)
Industry :
Internet Commerce
Sector :
Retail-Wholesale
5 Quarter Revenue
Revenue Growth
2017-Q2
$billion
%
YOY GROWTH
Compared to the industry
Long Term Growth
5 Year CAGR:
22.5%
Operating Profit
Operating Margin:
2.3%
Sector Average:
5.6%
5 Quarter Net Profit
Net Margins
2017-Q2
%
LTM Margin
Compared to the industry
Cash Flow
Operating cash flow:
$3.83B
Net Income:
$197M
PROS      CONS
Recent Growth
Long Term Growth
Cash Flow
Operating Margins
Net Margins
PE Valuation
PS Valuation
Rating: ★★★★★★★★★★ (0/5)
Relative Valuation
AMZN PS :
3
Industry PS :
0.7
Sector:   Retail-Wholesale.   *PE adjusted for one time items.
Other Metrics
Return on Invested Capital:
10.3%
Return on Equity:
9.8%
Free Cash Flow Margin:
3.5%
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Amazon Stock Analysis

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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.

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Amazon.com, Inc. Stock Rating 2.3/5

Our Amazon stock opinion is based on fundamentals of the company. This Amazon stock analysis is based on latest 2017 Q2 earnings. The stock price analysis takes into account the company's valuation metrics.

Should you buy AMZN stock?

  • Amazon's revenue growth came in at 24.8% in 2017 Q2.
  • Long term revenue growth has been strong with a 5 year compounded annual growth of 22.5%.
  • The operating cash flow looks good at 19.4 times the net income.

Should you sell AMZN stock?

  • Amazon had an unimpressive average operating margin of 2.3% during the Last Twelve Months (LTM).
  • Amazon's Net margins were poor at 1.3% in the last twelve months.
  • The AMZN stock currently trades at a PE of 242.4, which is expensive, compared to the industry average of 17.6.
  • AMZN stock is trading at a PS multiple of 3, which is a negative when compared to the Internet Commerce industry average multiple of 0.7.

Comments on this video and Amazon stock

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.