Question

Amazon Book Value per share 2018 76.68 2017 50.95 2016 37.28

Amazon Earnings Per Share 2018 20.14 2017 6.15 2016 4.90

Amazon Price/Earning Ratio 2018 84.10 2017 297.58 2016 171.60

Ebay Book Value per share 2018 7.57

Ebay earnings per share 2018 2.55

EBay Price/Earning ratio 2018 15.22

Write analysis of ratio results. Compare ratio results from amazon and ebay. Are common stockholders receiving an adequate return on their investment?

Answer 1

AMAZON

YEAR \ RATIO	BOOK VALUE PER SHARE	EARNING PER SHARE	PRICE EARNING RATIO
2018	76.68	20.14	84.10
2017	50.95	6.15	297.5
2016	37.28	4.90	171.60

EBAY

YEAR \ RATIO	BOOK VALE PER SHARE	EARNING PER SHARE	PRICE EARNING RATIO
2018	7.57	2.55	15.22

Amazon analysis

Book value

It is used to calculate the per share value of company based on common shareholders' equity.

formula

(stockholders' equity - perference stock) / Average number of common shares

the ration for amazon has increased from 37.28 to 76.68 in 3 years time .

clearly it shows that the number of perfered stocks has reduced in the firm over time and the value of common share holders has increaded .

Earning per share

EPS shows how much money a company makes for each share of its stock.

Earnings per share is a company's profit divided by the number of common stock shares it has outstanding.

formula

Earnings per Share= (Net Income − Preferred Dividends) / End-of-Period Common Shares Outstanding​

the ration for amazon has increased from 4.90 to 20.14 in 3 years time .

this shows the the company is eaning almost 4 times on each share in comparison to the earning of 2016.

Price earning ratio

The price-to-earnings ratio (P/E ratio) is the ratio for valuing a company that measures its current share price relative to its per-share earnings (EPS).

A high P/E ratio means that investors are anticipating higher growth in the future.

formula

P/E Ratio= Market value per share​ / Earnings per share

the ration for amazon has decreased from 171.60 to 84.10 in 3 years .

this means that the investors are not expecting a high return from the stock in future.

AMAZON - EBAY COMPARISON

Amazon Book Value per share 2018 76.68 and Ebay has Book Value per share 2018 7.57.

the amount or number of preference stocks in Ebay is higher than that of Amazon and hence Amazon has higher book value per share.

Amazon Earnings Per Share 2018 20.14 and Ebay earnings per share 2018 2.55.

clearly the earning per share is almost 8 times higher in amazon than ebay and hence it can be said that amazon is making higher earning per share than the per share earning ebay making amazon look more profitable and attractive.

Amazon Price/Earning Ratio 2018 84.10 and EBay Price/Earning ratio 2018 15.22.

this shows how much extra is a stock buyer is willing to pay for ever single unit of earning per share .

due to high EPS stockbuyers are willing to buy each share at a multiple of 84.10 x or for every single unit of EPS they are willing to pay 84.10 extra which is higher than the PE multiple of Ebay.

Hence it can be said that amazon is a more profitable firm than ebay.