While Amazon.com, Inc. (NASDAQ:AMZN) shareholders are probably generally happy, the stock hasn’t had particularly good run recently, with the share price falling 30% in the last quarter. But that doesn’t change the fact that the returns over the last five years have been pleasing. It has returned a market beating 78% in that time. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 43% decline over the last twelve months.
Since it’s been a strong week for Amazon.com shareholders, let’s have a look at trend of the longer term fundamentals.
View our latest analysis for Amazon.com
To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During five years of share price growth, Amazon.com achieved compound earnings per share (EPS) growth of 41% per year. This EPS growth is higher than the 12% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. Of course, with a P/E ratio of 90.81, the market remains optimistic.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on Amazon.com’s earnings, revenue and cash flow.
A Different Perspective
We regret to report that Amazon.com shareholders are down 43% for the year. Unfortunately, that’s worse than the broader market decline of 20%. Having said that, it’s inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn’t be so upset, since they would have made 12%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Like risks, for instance. Every company has them, and we’ve spotted 2 warning signs for Amazon.com (of which 1 is significant!) you should know about.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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