Amazon’s stock is always a hit with investors. Everyone wants to invest in Amazon because “it will always go up”.
It’s important to keep in mind that Amazon is already a large company, on of the largest in the world. Therefore, the amount of returns that you can get from Amazon might be less than a small cap stock.
That’s not to say that you shouldn’t invest in it. It might still be a good investment. Let’s see below:
Sales are through the roof for Amazon. As you can see they have consistently had a 20%+ increase Year-over-Year (YoY). There is also a positive uptrend in the last 5 years. So, for sales, Amazon is doing great.
What is the net income for Amazon? Are they making profit? Well, Amazon is increasingly making profit. As a matter of fact, some years the increase has been almost 300% YoY. That should make your mouth start to water. There is also a positive uptrend in the last 5 years, so we can assume it’s not just a one-time occurrence.
Earnings Per Share (EPS)
Usually when you see a company with increasing EPS, it’s usually a good sign for investors that the company is more and more profitable. Of course, this measure can be inflated by stock buybacks, which might be the case in the last 2 years. Nonetheless, EPS for Amazon is going in the right direction.
Cash is great, we all want more cash. If you are a company such as Amazon, more cash means more ability to deliver value to the shareholders. You can give it back to the shareholders (dividend, buyback) or you can invest it into the company. Either way, investors usually benefit when that happens.
In the case of Amazon, they do have extra cash to spend, and this has happened every year in (at least) the last 5 years. Soon, they’ll have more cash than they can spend.
Price of Stock
Amazon is currently priced at $1955.50. That gives it a P/E ratio of 85. For me, that is way too high to invest in. The average P/E ratio in the S&P 500 is about 20. Even the stock price is quite expensive in comparison to the last 2 years.
If Amazon goes below $1700, then I would invest, but that doesn’t mean it will not go higher from here.
In the future, I might take a further dive into other fundamentals of Amazon, but for now let me know what you think.
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