Jeff Bezos was born on January 12, 1964 in Albuquerque, New Mexico, United States. He studied Computer Science and Electronic Engineering at Princeton University. He worked as a computer programmer and was later a financial analyst at DE Shaw on Wall Street. In 1994, with an investment of $ 300,000, mainly provided by his parents, he decided to found an online bookstore called Cadabra.com; This had a catalog with more than 200,000 books and was based in the garage of the house that Jeff rented. The website developed little by little, going from 2,000 daily visitors to 50,000; getting Bezos and his wife Mackenzie to work packing the books and taking them to the post office for delivery. After a year,They decided to change the name of the company to Amazon because it was easier for it to be found in web search engines (Biografía y Vida, 2008).
The first Amazon.com website opened on July 16, 1995, growing exponentially in the first few days and making its presence on the internet notable. 30 days later, and without advertising in traditional media, Amazon already had a presence throughout the United States and in 45 countries, with sales of $ 2,000 a week. In 1998 it began to diversify by incorporating the sale of CDs, DVDs, software and video games (Herrera, 2015; Laia, 2018).
In 2017, Amazon had sales of $ 177,866 million. It is estimated that in 2018 the retail trade (Internet, Mail Order & Online Shops Industry), turn in which Amazon is developed, grows between 3.2% and 3.8%, since the competition between formats, channels and contenders is growing worldwide. The implementation of new technologies such as the involvement of robots in deliveries, the improvement of processes and the growth of the population with internet access, will increase the value of the contenders in electronic commerce and have a higher market share in commerce. retail (Anonymous, 2017; Rodney, 2017).
Analysis
Balance sheet
| Amazon.com Inc (AMZN) | |||
| Balance Sheet | |||
| Total Current Assets | 60,197 | ||
| Cash and Short Term Investments | 30,986 | ||
| Cash | - | ||
| Cash & Equivalents | $ 20,522 | ||
| Short Term Investments | 10,464 | ||
| Total Receivables, Net | 13,164 | ||
| Total Inventory | 16,047 | ||
| Prepaid Expenses | - | ||
| Other Current Assets, Total | - | ||
| Total NON Current Assets | 71,113 | ||
| Property / Plant / Equipment, Total - Net | 48,866 | ||
| Property / Plant / Equipment, Total - Gross | 48,866 | ||
| Accumulated Depreciation, Total | - | ||
| Goodwill, Net | 13,350 | ||
| Intangibles, Net | - | ||
| Long Term Investments | - | ||
| Other Long Term Assets, Total | 8,897 | ||
| Total Assets | 131,310 | ||
| Total Current Liabilities | 57,883 | ||
| Accounts Payable | 34,616 | ||
| Accrued Expenses | 18,170 | ||
| Notes Payable / Short Term Debt | - | ||
| Current Port. of LT Debt / Capital Leases | - | ||
| Other Current liabilities, Total | 5,097 | ||
| Total NON Current Liabilities | 45,718 | ||
| Total Long Term Debt | 24,743 | ||
| Deferred Income Tax | - | ||
| Other Liabilities, Total | 20,975 | ||
| Total liabilities | 103,601 | ||
| Total Equity | 27,709 | ||
| Common Stock, Total | 5 | ||
| Additional Paid-In Capital | 21,389 | ||
| Retained Earnings (Accumulated Deficit) | 8,636 | ||
| Treasury Stock - Common | - 1,837 | ||
| Unrealized Gain (Loss) | - | ||
| Other Equity, Total | - 484 | ||
| Total Liabilites & Equity | 131,310 |
Table 1: Balance Sheet
The balance sheet provides information on Amazon's assets, liabilities and equity. Regarding the first, property, plant and equipment represent 37% of total assets, and therefore have the greatest relevance in assets. In turn, cash and short-term investments rank second as a percentage of total assets with 24%; the third place is represented by the total inventory with 12%. This means that Amazon has very little inventory, with good cash flow and an increasing amount of fixed assets that could be used to expand the sales catalog and offer more products and improve its internal delivery processes.
On the liability side, accounts payable rank first in enforceability with 26% of assets, showing that Amazon is required to pay in a very short time. Second place is occupied by long-term debt with 19%, which means that loans with a term of more than one year have been incurred, possibly intended to increase assets or cover short-term debt. Similarly, capital constitutes 21%.
Statement of income
| Amazon.com Inc (AMZN) | ||||||
| Income Statement | ||||||
| Dec-17 | % | Dec-16 | % of Change | |||
| (+) | Revenues | 177,866 | 100.0% | 135,987 | 30.8% | |
| (-) | Cost of Revenue | 111,934 | 63.0% | 88,265 | ||
| (=) | Gross Profit | 65,932 | 37.0% | 47,722 | ||
| (-) | Selling / General / Admin. Expenses | 38,992 | 22.0% | 27,284 | ||
| (-) | Research & Development | 22,620 | 13.0% | 16,085 | ||
| (-) | Depreciation / Amortization | - | 0% | 1,716 | ||
| (-) | Unusual Expense (Income) | - | 0% | - | ||
| (-) | Other Operating Expenses, Total | 214 | 0.1% | - 1,549 | ||
| (=) | Operating Income | 4,106 | 2.3% | 4,186 | ||
| (+/-) | Interest Income (Expense) | - 646 | -0.4% | - 371 | ||
| (+/-) | Other, Net | 346 | 0.2% | 77 | ||
| (=) | Net Income Before Taxes | 3,806 | 2.1% | 3,892 | ||
| (-) | Provision for Income Taxes | 769 | 0.4% | 1,425 | ||
| (=) | Net Income After Taxes | 3,037 | 1.7% | 2,467 | 23.1% |
Table 2: Income Statement
The income statement shows that there was an increase in sales of 30.8% in 2017. Total cost of sales represents 63.0% of total sales, giving a gross profit of 37.0%. After reducing expenses, operating profit is obtained, which constitutes only 2.3% of sales and subtracting tax provisions derives in profit after tax, in which, in 2017, there was an improvement of 23.1% compared to 2016.
Statement of cash flows
| Amazon.com Inc (AMZN) | ||
| Cash flow | ||
| Dec-17 | Dec-16 | |
| Net Income / Starting Line | 3,037 | 2,467 |
| Cash From Operating Activities | 18,434 | 16,443 |
| Cash From Investing Activities | - 27,819 | - 9,876 |
| Cash From Financing Activities | 9,860 | - 2,911 |
| Foreign Exchange Effects | 713 | - 212 |
| Net Change in Cash | 1,188 | 3,444 |
Table 3 Statement of cash flow
The statement of cash flows reflects that Amazon had a significant amount of cash caused by operating activities, however, it invested in assets or acquired shares of other companies, thus reducing its cash. In turn, in 2017 it was financed by 9,860 million, contrary to what happened in 2016 where it had to pay financing of 2,911 million. The effects of the currency exchange favored the corporation in 2017 for 713 million, unlike what happened in 2016, when it had to pay 212 million. At the end of the 2017 cycle, 1,188 million net in cash were obtained, a reduction of 66% compared to 3,444 million in 2016.
Ratios
| Amazon.com Inc (AMZN) | ||
| Financial Ratios | ||
| VALUATION RATIOS | Amazon.com Inc (AMZN) | Internet, Mail Order & Online Shops Industry |
| P / E Ratio (TTM OR Trailing Twelve Months) | 265.61 | 197.31 |
| Beta | 1.61 | |
| Price to Sales (TTM) | 45.94 | 3.36 |
| Price to Book (Most Recent Quarter) | 25.96 | 24.61 |
| Price to Tangible Book (MRQ) | 167.22 | 31.42 |
| Price to Cash Flow (TTM) | 443.27 | 26.76 |
| DIVIDENDS | Amazon.com Inc (AMZN) | Internet, Mail Order & Online Shops Industry |
| Dividend Yield | 0% | 30.83% |
| Payout Ratio (TTM) | 0% | 12.44% |
| FINANCIAL STRENGTH | Amazon.com Inc (AMZN) | Internet, Mail Order & Online Shops Industry |
| Quick Ratio (MRQ) | 0.76 | 0.50 |
| Current Ratio (MR) | 1.04 | 0.50 |
| LT Debt to Equity (MRQ) | 68.12% | 26.20% |
| Total Debt to Equity (MRQ) | 373.89% | 30% |
| Interest Coverage (TTM) | -6.36 | 12.36 |
| PROFITABILITY RATIOS | Amazon.com Inc (AMZN) | Internet, Mail Order & Online Shops Industry |
| Gross Margin (TTM) | 37.1% | 33.8% |
| EBITD Margin (TTM) | 2.3% | 8.2% |
| Operating Margin (TTM) | 2.3% | 4.2% |
| Net Profit Margin (TTM) | 79.8% | 5.8% |
| Effective Tax Rate (TTM) | 20.2% | 22.6% |
Table 4 Financial Ratios
| EFFICIENCY | Amazon.com Inc (AMZN) | Internet, Mail Order & Online Shops Industry |
| Total Revenue / Employee (TTM) | $ 0.31 | $ 0.21 |
| Net Income / Employee (TTM) | $ 0.01 | $ 0.06 |
| Receivable Turnover (TTM) | 16.54 | 13.16 |
| Receivable Turnover (days) | 21.76 | 27.36 |
| Inventory Turnover (TTM) | 8.14 | 14.12 |
| Inventory Turnover (days) | 44.24 | 25.50 |
| Asset Turnover (TTM) | 1.35 | 1.55 |
| MANAGEMENT EFFECTIVENESS | Amazon.com Inc (AMZN) | Internet, Mail Order & Online Shops Industry |
| Return on Assets (TTM) | 2.31% | 4.50% |
| . Return on Investment (TTM) | 6.21% | 8.60% |
| Return on Equity (TTM) | 10.96% | 14.20% |
| Table 5: Financial ratios |
Market Value Ratios
The P / E ratio (265.6) shows that there is a great expectation to obtain profits when buying this stock. As for beta (1.61), there is great volatility when buying this stock, which would be beneficial in an upward market like Amazon, but if there is a drop in it, the yields would be very low or nil. The Price to sales (45.9) and Price to book (25.9) ratios indicate that the stock is overvalued and that, compared to the rest of the industry ratio (3.36), the value of Amazon's stock could provide more returns. The Price to tangible book (167.2) and Price to cash flow (443.27) ratios, show that the value of the share is also overvalued with respect to the fixed assets that Amazon owns and its operating cash flow.
Dividends
Amazon has not paid dividends to its shareholders throughout its history, so the Dividend Yield and Payout Ratio are at 0%, unlike the industry, which stands at 30.83% and 12.44% respectively.
Financial strength
Amazon has extensive long-term debt and leverage levels (68.12%) are higher than those of the industry (26.20%). It is not easy for him to cover the interest on the long-term debt pending since the interest coverage ratio is negative (-6.36). On the other hand, if it is possible for you to cover your liabilities and short-term debt with respective ease with current assets and the assets you have relative to the competition, according to the Quick Ratio (0.76) and the Current Ratio (1.04).
Cost effectiveness
Amazon has 37.1% gross margin after covering its costs and an operating profitability of 2.3%. You pay approximately 20.2% tax on your income and have 79.8% of profit after covering your costs.
Efficiency
Amazon collects its credit debts every 21.76 days ( industry 27.36), sells its inventory every 44.24 days (industry 25.5 days), has a relatively good turnover of its assets with 1.35, which, compared to the industry, has better income net per employee of $ 0.01 million versus $ 0.06 million.
Administration Effectiveness
In the effectiveness of the administration, Amazon presents lower percentages than the industry. Their returns on assets (2.31%), on investment (6.21%) and on capital (10.96%) demonstrate that the returns generated by Amazon are based mostly on the capital invested by the holders of shares and not so much on the assets of the company.
conclusion
I consider Amazon a company in potential growth. I believe that the existence of its large long-term debts is due to the fact that the company is investing more and more in its fixed assets, in order to expand its markets, its product catalog and even its way of selling. In my opinion, the value of the company's stock is greatly overvalued and in the event of an economic recession approaching, the shareholders would be involved in large losses. However, due to technological development and the way of life of societies is changing, I would invest in this company.
References
Anonymous. (December 15, 2017). Vend's Retail Trends and Predictions for 2018. Retrieved on June 11, 2018, from Vend.com:
Biography and Life. (June 24, 2008). Jeff Bezos. Obtained from
CSI Market. (June 10, 2018). Internet, Mail Order & Online Shops Industry. Retrieved from
Herrera, D. (March 22, 2015). How was Amazón born? Retrieved on June 11, 2018, from Libertad Digital:
Investing.com. (June 10, 2018). Amazon.com Inc (AMZN). Retrieved on June 10, 2018, from Investing:
Investing.com. (June 10, 2018). Retail Stock Screener. Retrieved on June 10, 2018, from Investing.com: https://www.investing.com/stock-screener/?sp=country::5-sector::a-industry::98-equityType::a- exchange:: a% 3Ceq_market_cap; 1
Laia, O. (January 1, 2018). ECommerce Success Story: The Amazon Story. Retrieved on June 10, 2018, from Oleoshop:
Rodney, S. (December 12, 2017). 2018 retail, wholesale and distribution industry trends outlook.. Retrieved on June 10, 2018, from Deloitte.com:
