Market Summary
From the beginning of October 2018, investors in the eCommerce retail have not experienced a good period for long-term stocks. Amazon Inc. has not been an exception although the long-term investors received good rewards by the start of the financial year 2019, with the stocks increased by more than 32% ( Market Watch, 2019) . In the overall eCommerce retail market indicated by SPDR S&P Retail ETF-XRT, the overall stock price returns have been appalling at about -8%. The S&P 500 has also not performed any better, with returns being approximately -5% year-to-year. The major eCommerce retail stocks held by XRT ETF include Kroger, Casey’s General Stores, Walgreens Boots Alliance, Autozone, and Nutrisystem. Amazon, however, is not one of the stocks held by XRT ETF; thus, the unreality of the long-held assumption that the company is killing the retail sector.
Analysts’ Summary
According to analysts’ reports, although the company’s stock has reported sharp decline compared to its previous highs, it highlights relative strength compared to the overall eCommerce and retail markets. Both XRT and S&P 500 have hit their lows during the last days. Amazon Inc., however, has not reported further depressions in the past few days.
Delegate your assignment to our experts and they will do the rest.
Ratio Analysis
Historical current ratio and current ratio for Amazon can be used in assessing the company’s liquidity. Current ratio denotes a liquidity ratio measurement for the firm’s capacity to pay its short-term debts ( Goedhart, Koller, & Wessels, 2015) . By the end of the Q2 2019 financial year, the company’s current ratio was 1.10. Amazon’s Quick ratio by the end of Q2 2019 was 0.84. Financial leverage ratios for the company include Debt/Equity Ratio and debt ratio. Debt/equity ratio measures the firm’s fiscal leverage by dividing the long-term debt by shareholders’ equity ( Goedhart, Koller, & Wessels, 2015) . The Q2 2019, Amazon’s debt to equity ratio was 0.44. The company’s current debt ratio (total debt to total assets) is 30.30.
Asset management ratios for the company include Inventory Turnover Ratio and Asset Turnover Ratio. Amazon’s Inventory Turnover Ratio was 1.96 by the beginning of the last quarter, 2019 financial year. The updated asset turnover ratio was 1.58 by the beginning of the business day October 07, 2019. The asset management ratios indicate the number of times the firm’s inventory have been sold and replaced overtime ( Goedhart, Koller, & Wessels, 2015) .
Profitability ratios for the company include Return on Capital ratio, Return on Equity Ratio, Gross Margin Ratio, and Return on Assets, among others. Amazon reported a gross margin ratio of 40.25, return on equity of 28.27, return on assets 6.85, return on total capital 15.44, and return on invested capital 13.52. The profitability ratios above indicate that the company has been receiving considerable profits from its operations to finance its capital needs ( Goedhart, Koller, & Wessels, 2015) . Regarding the performance of the company’s profitability, creditors and investors can observe that Amazon’s return on investment is robust.
Market value ratios include Enterprise Value to EBITDA, P/E current, P/E ratio, Price to Sales Ratio, and Price to Cash Flow Ratio. Amazon’s valuation ratios entail P/E (with extraordinary items) 72.34, Price to Sales 3.22, Enterprise Value to EBITDA 34.27, and Price to Cash Flow 24.44. Analysis of the valuation ratios above indicates that Amazon has a good return on investment, particularly if an investor were to purchase shares of the company at the current market prices.
References
Goedhart, M., Koller, T., & Wessels, D. (2015). Valuation: Measuring and managing the value of companies . JohnWiley & Sons.
Market Watch. (2019). Amazon.com Inc. retrieved from https://www.marketwatch.com/investing/stock/amzn/profile
