Financial Analysis of Amazon: Performance and Prospects

This report provides a financial analysis of Amazon, focusing on its performance in the e-commerce sector. It examines key financial metrics such as revenue, P/E ratio, and dividend yield, comparing Amazon to its competitors like Alibaba. The analysis highlights Amazon's strong growth, market capitalization, and global reach, while also discussing the implications of its high P/E ratio and lack of dividend payments for investors. The report concludes that while Amazon's future looks bright in terms of growth, the current financial strategy may not provide immediate high returns for shareholders due to the company's focus on expansion. The report also references several academic sources to support its findings.

2017
Financial Analysis

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By student name
Professor
University
Date: Januray 30 , 2018.
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Contents
Analysis…………………………………………………………………........................................................3
Key Points………………………………………………………………………………………………………………….…4
References.....…………………………………………………………….....................................................5
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The selected company is Amazon, as it is a big brand in the e commerce sector. The company is
having operations all over the world and the overall revenue of the company runs into millions. The
stocks of the company are very highly traded across the world and it pays great returns to its investor
(Abbott & Kantor, 2017). Given the volume involved, it will be great to analyze the overall movement of
the stock of the company and will provide an insight on how well the investors can earn given the
current share prices and the movement of the overall market.
Based on the articles the company has been performing well, the overall increase was 56%, over the
year. Since last three years, there has been an increase of 282 percent over the last three-year period.
The overall market capitalization of the company is $571 billion, which makes it the fourth largest
company on the S&P 500 index. The company has been growing and churning out great returns for its
shareholders, hence it can be said that it will continue the same in the future.
The investment in the shares of the company in comparison to other company’s whole stock is
always a good idea as it will bring in more returns. But given the amount of money involved and the
level of trading that goes on, investing in such big stocks is not always a good idea, because in case the
market crashes the shareholders will have to bear heavy losses (Alexander, 2016).
Amazon faces many competitors in this e commerce sector, as there has been rapid development in
this field in the recent years. The biggest competitor of the company is Alibaba, but there is huge
difference in the stock prices of the two company. In case of Alibaba the present stock price is $204.29
and in case of Amazon the stock price is $1450.89. On other aspects also, Amazon is a global leader and
has better business prospects in return to its competitor. In countries like India, the company faces stiff
competition from Flipkart and Snapdeal, but given the global reach of the company and the overall
brand that it has developed throughout the years, the company is at a better position in comparison to
its competitors (Chariri, 2017). An analysis of the Amazon with respect to its competitors is given below.
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The company is growing at very fast rate and has churned in an increase rate of 56 percent in
the last year. In 2016 the net revenue of the company was $135987 million. The current price to
earnings ratio of the company is 338.31, which is the highest since years. It illustrates that the company
is suppressing its earning for an overall increase in the price of the company (Chiapello, 2017). In case of
companies that have high P.E ratios, they are known as growth stocks, but that does not mean that they
are overpricing their stocks and it won’t be beneficial in the long run. There are changes that has been
initiated by the company to keep the P.E ratio stable and thus there is an estimation in coming years the
P.E ratio will fall making the stock position better.
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The company pays no dividend and the overall dividend yield for the company is nil. This is a bad
thing for the shareholders because they are not getting the return that they deserve on their
shareholdings. The dividend yield ratio reflects the total amount of dividend that the company pays
every year in comparison to its stocks in the market (Dichev, 2017). In case of Amazon the same is nil
which reflects that the company is suppressing its earnings as the focus of the company is to expand its
operations. So even though the company is earning good amount of revenue no dividend is paid to the
shareholders. The future for the company looks bright on growth prospects and business prospects, but
it is not good for the shareholders as the company is suppressing its earnings to fuel its growth so the
shareholders are not earning great returns. But over the years the company has progressed massively
and in times to come the same will continue.
The company is listed on the NASDAQ stock exchange and the ticker symbol for the company is
AMZN.
Key Point
Based on the above analysis and considering the needs of the investors who are investing such
huge amount of money in the company. It can be said it will be fruitful to invest in the company, given
the shareholders are ready to hold the shares for a longer time. Based on present data, the company is
focusing more on expansion hence it is not providing huge returns to the shareholders, but as years will
pass the company will give back to the people who have invested in the same (Iasplus, 2017). The
ecommerce business is one of the most profitable in today’s time and the trend will continue in times to
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come. Amazon is the biggest company is this field and there is no doubt in the same. So, it is imperative
that the stocks of the company if traded on the stock exchange will get fair returns to the shareholders.
Hence in case if someone is investing in the company then they should consider the long-time growth
prospects of the company and consider the same (Maynard, 2017). The present returns are also good
but the company, being the brand that it is can provide more to its investors and that will surely happen
in times to come.
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References
Abbott, M., & Kantor, A. (2017). Fair Value Measurement and Mandated Accounting Changes: The Case
of the Victorian Rail Track Corporation. Australian accounting Review.
Alexander, F. (2016). The Changing Face of Accountability. The Journal of Higher Education, 71(4), 411-
431.
Chariri, A. (2017). FINANCIAL REPORTING PRACTICE AS A RITUAL: UNDERSTANDING ACCOUNTING
WITHIN INSTITUTIONAL FRAMEWORK. Journal of Economics, Business and Accountancy, 14(1).
Chiapello, E. (2017). Critical accounting research and neoliberalism. Critical Perspectives on Accounting,
43, 47-64.
Dichev, I. (2017). On the conceptual foundations of financial reporting. Accounting and Business
Research, 47(6), 617-632.
Iasplus. (2017). www.iasplus.com. Retrieved december 07, 2017, from
https://www.iasplus.com/en-ca/projects/assurance/research-projects/iaasb-revisions-to-isa-
315-identifying-and-assessing-the-risks-of-material-misstatement-through-understanding-the-
entity-and-its-environment-research
Maynard, J. (2017). Financial accounting reporting and analysis (second ed.). United Kingdom: Oxford
University Press.
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