It hasn't been a great morning session for Amazon.com investors, who have watched their shares sink by -2.9% to a price of $205.26. Some of you might be wondering if it's time to buy the dip. If you are considering this, make sure to check the company's fundamentals first to determine if the shares are fairly valued at today's prices.
Amazon.com's Valuation Is in Line With Its Sector Averages:
Amazon.com, Inc. engages in the retail sale of consumer products, advertising, and subscriptions service through online and physical stores in North America and internationally. The company belongs to the Consumer Discretionary sector, which has an average price to earnings (P/E) ratio of 22.6 and an average price to book (P/B) ratio of 3.19. In contrast, Amazon.com has a trailing 12 month P/E ratio of 44.0 and a P/B ratio of 8.33.
Amazon.com has moved 45.7% over the last year compared to 31.8% for the S&P 500 — a difference of 13.9%. Amazon.com has a 52 week high of $215.9 and a 52 week low of $141.5.
The Firm Has a Declining EPS Growth Trend:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $232,887 | $280,522 | $386,064 | $469,822 | $513,983 | $574,785 |
| Operating Margins | 5% | 5% | 6% | 5% | 2% | 6% |
| Net Margins | 4% | 4% | 6% | 7% | -1% | 5% |
| Net Income (M) | $10,073 | $11,588 | $21,331 | $33,364 | -$2,722 | $30,425 |
| Net Interest Expense (M) | $1,417 | $1,600 | $1,647 | $1,809 | $2,367 | $3,182 |
| Depreciation & Amort. (M) | $15,341 | $21,789 | $25,180 | $34,433 | $41,921 | $48,663 |
| Diluted Shares (M) | 1,002 | 1,010 | 1,026 | 10,296 | 10,189 | 10,492 |
| Earnings Per Share | $10.05 | $11.47 | $20.79 | $3.24 | -$0.27 | $2.9 |
| EPS Growth | n/a | 14.13% | 81.26% | -84.42% | -108.33% | 1174.07% |
| Avg. Price | $82.09 | $89.46 | $134.04 | $167.19 | $138.82 | $205.25 |
| P/E Ratio | 78.93 | 75.81 | 62.64 | 50.51 | -514.15 | 69.11 |
| Free Cash Flow (M) | $17,296 | $21,653 | $25,924 | -$14,726 | -$16,893 | $32,217 |
| CAPEX (M) | $13,427 | $16,861 | $40,140 | $61,053 | $63,645 | $52,729 |
| EV / EBITDA | 28.38 | 23.88 | 27.57 | 28.63 | 26.39 | 24.52 |
| Total Debt (M) | $24,965 | $24,820 | $33,174 | $50,553 | $70,542 | $67,182 |
| Net Debt / EBITDA | -0.24 | -0.31 | -0.19 | 0.24 | 0.31 | -0.07 |
| Current Ratio | 1.1 | 1.1 | 1.05 | 1.14 | 0.94 | 1.05 |
Amazon.com has rapidly growing revenues and increasing reinvestment in the business and generally positive cash flows. Additionally, the company's financial statements display decent operating margins with a stable trend and healthy leverage levels. However, the firm has declining EPS growth. Finally, we note that Amazon.com has just enough current assets to cover current liabilities, as shown by its current ratio of 1.05.
