Comparing Amazon.com With Industry Competitors In Broadline Retail Industry

Amidst the fast-paced and highly competitive business environment of today, conducting comprehensive company analysis is essential for investors and industry enthusiasts. In this article, we will delve into an extensive industry comparison, evaluating Amazon.com AMZN in comparison to its major competitors within the Broadline Retail industry. By analyzing critical financial metrics, market position, and growth potential, our objective is to provide valuable insights for investors and offer a deeper understanding of company's performance in the industry.

Amazon.com Background

Amazon is a leading online retailer and one of the highest-grossing e-commerce aggregators, with $386 billion in net sales and approximately $578 billion in estimated physical/digital online gross merchandise volume in 2021. Retail-related revenue represents approximately 80% of the total, followed by Amazon Web Services' cloud computing, storage, database, and other offerings (10%-15%), advertising services (5%), and other. International segments constitute 25%-30% of Amazon's non-AWS sales, led by Germany, the United Kingdom, and Japan.

Upon analyzing Amazon.com, the following trends can be observed:

• At 75.69, the stock's Price to Earnings ratio significantly exceeds the industry average by 2.83x, suggesting a premium valuation relative to industry peers.

• It could be trading at a premium in relation to its book value, as indicated by its Price to Book ratio of 8.17 which exceeds the industry average by 1.44x.

• The Price to Sales ratio of 2.71, which is 1.38x the industry average, suggests the stock could potentially be overvalued in relation to its sales performance compared to its peers.

• The Return on Equity (ROE) of 5.62% is 0.7% above the industry average, highlighting efficient use of equity to generate profits.

• The company has higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $25.13 Billion, which is 4.69x above the industry average, indicating stronger profitability and robust cash flow generation.

• The company has higher gross profit of $24.54 Billion, which indicates 1.98x above the industry average, indicating stronger profitability and higher earnings from its core operations.

• The company is witnessing a substantial decline in revenue growth, with a rate of 12.57% compared to the industry average of 16.97%, which indicates a challenging sales environment.

Debt To Equity Ratio

The debt-to-equity (D/E) ratio is an important measure to assess the financial structure and risk profile of a company.

Considering the debt-to-equity ratio in industry comparisons allows for a concise evaluation of a company's financial health and risk profile, aiding in informed decision-making.

By evaluating Amazon.com against its top 4 peers in terms of the Debt-to-Equity ratio, the following observations arise:

• Amazon.com demonstrates a stronger financial position compared to its top 4 peers in the sector.

• With a lower debt-to-equity ratio of 0.75, the company relies less on debt financing and maintains a healthier balance between debt and equity, which can be viewed positively by investors.

Key Takeaways

The valuation analysis suggests that Amazon.com has a high PE ratio, indicating that the stock is relatively expensive compared to its peers in the Broadline Retail industry. Similarly, the high PB and PS ratios also suggest that the stock may be overvalued. On the other hand, Amazon.com exhibits high ROE, EBITDA, and gross profit, indicating strong profitability and operational efficiency. However, the low revenue growth suggests that the company may be experiencing slower expansion compared to its industry peers.

This article was generated by Benzinga's automated content engine and reviewed by an editor.