Numbers analysis: Amazon (AMZN)

I’ve been a customer of Amazon for over a decade. It’s easy to shop everything and has good prices. Today I dusted off my old Amazon Kindle Keyboard from 2010 (?). It’s still working fine and I hope I can do some reading this weekend.

Amazon.com Inc is a leading online retailer and one of the highest-grossing e-commerce aggregators, with $386 billion in net sales and approximately $482 billion in estimated physical/digital online gross merchandise volume, or GMV, in 2020. Retail related revenue represented approximately 83% of total, followed by Amazon Web Services’ cloud computing, storage, database, and other offerings (12%), and advertising services and cobranded credit cards (6%). International segments constituted 27% of Amazon’s non-AWS sales in 2020, led by Germany, the United Kingdom, and Japan.

Description from www.nordnet.se


Monster stocks have a tendency of going sideways for long periods before continuing up. Lets have a look at the numbers.

Charts

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Weekly chart
Daily chart

Statistics

The numbers analysis below is the first step in Rule 1 Investing by Phil Town. In his book Rule #1: The Simple Strategy for Successful Investing in Only 15 Minutes a Week! (no affiliate) he writes about his investing philosophy which centers around four key principles he refers to as the Four M’s: Meaning, Moat, Management and Margin of Safety.

The first requirement is an average annual growth rate of at least 10%, the past 10 years, in the ROIC (Return On Invested Capital), Sales, EPS (Earnings Per Share), Equity and Cash Flow. The average 5 year and 1 year growth rates should also be above 10%. High growth rates suggest a sustainable MOAT.

Next step is to analyze the the Four M’s: Meaning, Moat, Management and Margin of Safety.

The aim is to find a fantastic company, with a great track record, to invest in for at least 10 year. The expected average yearly return is at least 15%. This is used in the calculations. With an investment of 100 USD and a yearly return of 15%, 100 USD will have increased to 405 USD in 10 years time because of interest-on-interest or compound interest.

Year20112012201320142015
ROIC
Sales (MUSD)48077610937445288988107006
EPS (USD)1.37-0.090.59-0.521.25
Equity (MUSD)7757819297461074113384
Operational cash flow (MUSD)631-39274-241596
Year20162017201820192020
ROIC7.12%5.53%13.04%10.44%12.04%
Sales (MUSD)135987177866232887280522386064
EPS (USD)4.96.1520.1423.0141.83
Equity (MUSD)1928527709435496206093494
Operational cash flow (MUSD)23713033100731158821331
P/E153190758078

ROIC and P/E are gurufocus.com. The rest are from macrotrends.com

Growth Rates

Yearly average10 year5 year1 year
ROIC10%12%
Sales Growth Rate26%30%38%
EPS Growth Rate46%71%82%
Equity Growth Rate32%48%51%
Cash Flow Growth Rate48%73%84%

Price calculations

Growth ratesx2AverageMedian P/EAverage between the high and low P/E
P/E631158090
Calculated future price in 10 years42994773895374260460
Calculated Price10748193471343615115
Margin of Safety (50%)5374967467187558

Current price: 3300 USD

Fair value price range: 10748 – 19347 USD

MoS price range: 5374 – 9674 USD

To be considered for further analysis here, as a growth stock, the requirement is that the 10 year yearly average growth rate is at least 5% in all five categories. They are.

The growth rates look really good. The 1 and 5 -year ones have picked up pace. Almost every time I do this rule 1 calculations they are off the charts in these kind of companies with high growth rates. I don’t know what to make of it. It is the fifth largest company by market cap in the world ($1.671 T). Can it grow more? Why not?

Will I buy it? Not sure.

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