Is Amazon Really That Expensive?
Amazon (NAS: AMZN) continues to be one of the most perplexing and interesting companies in the investing universe. With an ever-growing top line and an ever-narrowing bottom line, investors are justifiably wondering if it's all worth it. The company now trades for a sky-high P/E of 290 after releasing its most razor-thin profit margins ever. But this is a classic case of not judging a book by its cover.
In Amazon's case it consistently reinvests in itself through new developments, acquisitions, and a constantly expanding universe. If you back out the money it has spent on acquisitions and capital expenditures over the last few years, the company is actually attractively priced. However, this needs to be kept in perspective, as Amazon as a company has reinvestment and expansion at its core, so it's unlikely that it will ever cease capital expenditures and acquisitions.
Keep in mind that this company still has zero debt and that online purchases still make up less than 10% of total retail transactions, and it becomes clear why Amazon would want to keep that money churning back into internal growth instead of letting it hit the bottom line.
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The article Is Amazon Really That Expensive? originally appeared on Fool.com.Austin Smith owns shares of eBay. The Motley Fool owns shares of Amazon.com and Costco Wholesale. Motley Fool newsletter services recommend Amazon.com, Costco Wholesale, and eBay. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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