Question

**AMAZON**

Assess the financial value of the company using relevant indicators. What does your assessment imply for future business health and performance? what is the business’s current market value? What is its price-to-earnings ratio? What do these suggest about investor perceptions of the business’s future?

Answer 1

To understand financial value of any firm, the following parameters are very much useful and Simultaneously, we will check the Situation of Amazon:

1. Profit margin %: This gives the rate of conversion of sales into profit and AMAZON stands at 4.13 % which is good in comparison to its near competitors.

2. Liquidity (Working Capital): Liquidity for any firm is required to mitigate its short term liability or acquisition in some cases and it is also denoted by Quick ratio which equals to the difference of current assets and Inventory divided by current liabilities. For AMAZON, the value is 0.83 and it is better than all its small or big competitors.

3. Market share: This decides the market leader in a particular industry and Amazon has recently overtaken walmart to become the market leader in retail segment. And in other segments too, it is highly competitive.

4. ROIC (Return on Invested Capital): This refers to the return on every dollar invested as capital. And, AMAZON's value stands at 12.59% and it is just lower than its big competitor TARGET.

5. Liability (Debt to Equity Ratio): This shows the overall liability of a firm which can be short term or long term borrowings. The lower the better. Here again, AMAZON is standing at 0.38 which is among the lowest of all its competitors.

Overall, the health and performance of the firm is amazing and going good. Moreover, the fundamentals and future steps of the firm should be watched carefully which can decide the tenure to stick with the firm.

The Current market value of the overall AMAZON group is approx. $ 1.50 Trillion (Source - Forbes).

Price to Earning ratio is 123.85 as on date whereas it's industry has a PE ratio of 90. So, In short the company is over-valued.

As an investor, I would definitely go with this stock as I see a very healthy future for this company including its position to acquire or merge even its competitors in itelf. The firm is also very much and ahead with the market trend and creates demand among the customers. However, as the firm is very much over-valued currently, it is wise to wait for a better price before one plunges.

Hope, this has clarified the query.