Is Amazon Cheap on 200 Times Earnings?

Amazon trades on a price/earnings multiple of more than 200 times, but some still insist it remains cheap. Here's why we may need to revisit how to value the stock

David Brenchley 8 February, 2018 | 8:33AM
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Amazon warehouse, Are Amazon' shares cheap or expensive?

Ever since Amazon (AMZN) came to prominence as an online book store in the 1990s, it’s been redefining how we shop. The e-commerce company has distrupted the retail sector; causing the demise of not just book stores, but clothing, electronics, sports equipment and even food retailers. As it takes its first foray into the healthcare market there’s a more unorthodox area it’s also disrupting: how investors value companies.

The mainstream way to value a company tends to be by looking at its price/earnings (P/E) ratio, which compares a company’s share price with its earnings per share figure. One can extend this out and look at the price/earnings-to-growth (PEG) ratio, which frames the P/E in the context of a company’s expected future growth rate.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Allianz Technology Trust Ord310.52 GBP0.82Rating
Amazon.com Inc3,409.02 USD0.00Rating
Federated Hermes Glb Eq F GBP Acc3.39 GBP1.25Rating
Mid Wynd International Inv Tr Ord790.01 GBP0.25Rating
Scottish Mortgage Ord1,437.59 GBP0.78Rating

About Author

David Brenchley

David Brenchley  is a Reporter for Morningstar.co.uk