A Fundamental Analysis of Amazon



Analyzing Amazon’s comprehensive valuation

Amazon (AMZN) has an enterprise value (or EV) of ~$459.5 billion. This metric provides a comprehensive measure of a company’s total value to investors, and it’s used as an alternative to a company’s equity market cap valuation.

Peer companies Facebook (FB), eBay (EBAY), Alphabet (GOOG), and Alibaba (BABA) have EVs of ~$411.8 billion, ~$40.4 billion, ~$569.1 billion, and ~$366.7 billion, respectively.

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Amazon’s trailing-12-month EV-to-adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) multiple is 35.8x. Its EV-to-estimated EBITDA multiple is 24.3x. Its EV-to-sales multiple for the trailing 12 months is 3.2x, while its EV-to-sales multiple is expected to be 2.3x next year.

Amazon’s trailing-12-month EV-to-cash flow multiple and trailing-12-month EV-to-free cash flow multiple are 27.3x and 48.9x, respectively.

Earnings and sales

The company reported EPS (earnings per share) of ~$5 in 2016, and its EPS for 2017 are expected to be ~$6.68. Last year, its total sales of $142.6 billion reflected an annual rise of 26%. Its sales are expected to rise to ~$166.1 billion in 2017 and ~$200.8 billion in 2018.

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Inside Amazon’s price metrics

With a book value per share of ~$46.02, Amazon is trading at a price-to-book value of 21.8x. The stock’s estimated book value per share is ~$53.9. Its price-to-sales ratio is 3.3x, and its estimated price-to-sales ratio is 2.9x.

Is Amazon an investment or junk?

Moody’s rating on Amazon’s debt is WR (withdrawn rating). The company has an S&P debt rating of AA- and a debt outlook of “stable.”


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