When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, you can make far more than 100% on a really good stock. Long term Amazon.com, Inc. (NASDAQ:AMZN) shareholders would be well aware of this, since the stock is up 136% in five years. On top of that, the share price is up 22% in about a quarter. But this move may well have been assisted by the reasonably buoyant market (up 12% in 90 days).
On the back of a solid 7-day performance, let’s check what role the company’s fundamentals have played in driving long term shareholder returns.
Check out our latest analysis for Amazon.com
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During five years of share price growth, Amazon.com achieved compound earnings per share (EPS) growth of 33% per year. This EPS growth is higher than the 19% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We’re pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on Amazon.com’s earnings, revenue and cash flow.
We’re pleased to report that Amazon.com shareholders have received a total shareholder return of 45% over one year. That gain is better than the annual TSR over five years, which is 19%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Is Amazon.com cheap compared to other companies? These 3 valuation measures might help you decide.
But note: Amazon.com may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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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.
