Amazon currently trades at $238.80 per share and has shown little upside over the past six months, posting a middling return of 4.1%. The stock also fell short of the S&P 500’s 10.1% gain during that period.
Is now the time to buy AMZN? Or does the price properly account for its business quality and fundamentals? Find out in our full research report, it’s free.
Why Does AMZN Stock Spark Debate?
Founded by Jeff Bezos after quitting his stock-picking job at D.E. Shaw, Amazon (NASDAQ:AMZN) is the world’s largest online retailer and provider of cloud computing services.
Two Positive Attributes:
1. Skyrocketing Revenue Shows Strong Momentum
Amazon proves that huge, scaled companies can still grow quickly. The company’s revenue base of $347.9 billion five years ago has nearly doubled to $691.3 billion in the last year, translating into an exceptional 14.7% annualized growth rate.
Over the same period, Amazon’s big tech peers Alphabet, Microsoft, and Apple put up annualized growth rates of 17.6%, 14.8%, and 8.7%, respectively. 
2. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it shows whether a company’s growth is profitable. It also explains how taxes and interest expenses affect the bottom line.
Amazon’s EPS grew at an astounding 32.9% compounded annual growth rate over the last five years, higher than its 14.7% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
One Reason to be Careful:
Mediocre Free Cash Flow Margin Limits Reinvestment Potential
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Amazon has shown poor cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 2.4%, lousy for a consumer internet business.
Final Judgment
Amazon’s positive characteristics outweigh the negatives. With its shares trailing the market in recent months, the stock trades at 32× forward price-to-earnings (or $238.80 per share). Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
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