Evaluating Amazon.com Against Peers In Broadline Retail Industry

In today's rapidly changing and highly competitive business world, it is imperative for investors and industry observers to carefully assess companies before making investment choices. In this article, we will undertake a comprehensive industry comparison, evaluating Amazon.com AMZN vis-à-vis its key competitors in the Broadline Retail industry. Through a detailed analysis of important financial indicators, market standing, and growth potential, our goal is to provide valuable insights and highlight company's performance in the industry.

Amazon.com Background

Amazon is the leading online retailer and marketplace for third party sellers. Retail related revenue represents approximately 75% of total, followed by Amazon Web Services' cloud computing, storage, database, and other offerings (15%), advertising services (5% to 10%), and other the remainder. International segments constitute 25% to 30% of Amazon's non-AWS sales, led by Germany, the United Kingdom, and Japan.

After thoroughly examining Amazon.com, the following trends can be inferred:

• The Price to Earnings ratio of 44.64 for this company is 2.05x above the industry average, indicating a premium valuation associated with the stock.

• The elevated Price to Book ratio of 8.48 relative to the industry average by 1.69x suggests company might be overvalued based on its book value.

• The stock's relatively high Price to Sales ratio of 3.6, surpassing the industry average by 2.08x, may indicate an aspect of overvaluation in terms of sales performance.

• The company has a lower Return on Equity (ROE) of 6.19%, which is 0.09% below the industry average. This indicates potential inefficiency in utilizing equity to generate profits, which could be attributed to various factors.

• Compared to its industry, the company has higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $32.08 Billion, which is 4.61x above the industry average, indicating stronger profitability and robust cash flow generation.

• Compared to its industry, the company has higher gross profit of $31.0 Billion, which indicates 1.91x above the industry average, indicating stronger profitability and higher earnings from its core operations.

• With a revenue growth of 11.04%, which is much lower than the industry average of 12.86%, the company is experiencing a notable slowdown in sales expansion.

Debt To Equity Ratio

The debt-to-equity (D/E) ratio measures the financial leverage of a company by evaluating its debt relative to its equity.

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.

In terms of the Debt-to-Equity ratio, Amazon.com stands in comparison with its top 4 peers, leading to the following comparisons:

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

• With a lower debt-to-equity ratio of 0.52, 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

For Amazon.com, the PE, PB, and PS ratios are all high compared to its peers in the Broadline Retail industry, indicating that the stock may be overvalued. The low ROE suggests that Amazon.com is not generating significant returns on shareholder equity. However, the high EBITDA and gross profit margins show strong operational performance. The low revenue growth rate may be a concern for Amazon.com compared to its industry peers.

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