uploads/2017/10/15.jpg

Amazon’s Valuations Metrics

By

Updated

A look at Amazon’s enterprise value and related multiples

Amazon (AMZN) boasts an enterprise value (or EV) of $460.5 billion for 2017. In comparison, Alphabet (GOOG), Facebook (FB), Twitter (TWTR), and eBay (EBAY), Amazon’s peer companies in the Internet sector, have EVs of $588.4 billion, $462.9 billion, $10.5 billion, and $44.0 billion, respectively.

How does Amazon’s EV compare with its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) for the last 12 months? The company’s EV-to-adjusted-EBITDA multiple for the trailing 12 months is 35.7x. That compares with 24.8x expected in 2018. Amazon’s EBITDA margin for 2017 is 9.0%.

A further look at Amazon’s EV ratios shows that EV-to-sales for the trailing 12 months is 3.2x and that EV-to-sales anticipated for 2018 is 2.1x. The company’s trailing 12-month EV-to-cash-flow multiple is 27.0x.

Article continues below advertisement

Eye on Amazon’s price multiple

Amazon’s book value per share is $48.50, while its estimated book value per share is $43.50. The stock is trading at a price-to-book value of 20.4x.

The company’s price-to-sales ratio is 3.2x for 2017, and the estimate for 2018 is 2.7x.

Inside Amazon’s EBITDA metrics

The EBITDA of $12.9 billion that Amazon reported in 2017 was a 34.0% fall. Wall Street is looking for EBITDA of $18.6 billion for the next period, which, if attained, would imply EBITDA growth -24.0%.

Amazon’s shares are trading at a price-to-EBITDA ratio of 36.7x.

Article continues below advertisement

EBIT on interest coverage ratio

Can Amazon easily pay the interest on its outstanding debt? The answer lies in examining the company’s EBIT (earnings before interest and tax) on interest ratio, also called interest coverage ratio, which in this case is 25.9x. That means it should be able to easily repay its debt.

Amazon’s credit rating

Moody’s rating on Amazon’s debt is WR (withdrawn rating).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

Advertisement

More From Market Realist