Let’s talk about the popular Amazoncom Inc. (NASDAQ:AMZN). The company’s shares saw a double-digit share price rise of over 10% in the past couple of months on the NasdaqGS. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine Amazon.com’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. Check out our latest analysis for Amazon.com
What’s the opportunity in Amazon.com?Amazon.com is currently overpriced based on my relative valuation model. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 226x is currently well-above the industry average of 43.12x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Since Amazon.com’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of Amazon.com look like?Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. With profit expected to more than double over the next couple of years, the future seems bright for Amazon.com. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in AMZN’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe AMZN should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on AMZN for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for AMZN, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Amazon.com. You can find everything you need to know about Amazon.com in the latest infographic research report. If you are no longer interested in Amazon.com, you can use our free platform to see my list of over 50 other stocks with a high growth potential.