AMAZON COM INC (AMZN) Stock Analysis

AMAZON COM INC (AMZN) Stock Analysis

Overall Grade: F (Concerning)

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AMAZON COM INC faces challenges in financial performance that warrant careful analysis.

Key Metrics:

Metric Value Context
ROIC 21.7% Above industry average
FCF Margin 1.1% Cash flow pressure
Debt/Equity 0.2x Conservative leverage

Investment Thesis: Strong return on invested capital of 21.7% suggests durable competitive advantages and efficient capital allocation.


What is AMAZON COM INC's Profitability and ROIC?

AMAZON COM INC generates strong returns on invested capital at 21.7%, indicating efficient capital allocation and competitive advantages. Gross margin of 50.3% with operating margin at 11.2% reflects the company's strong market position.

Key Metrics

Metric Value Rating Interpretation
Return on Invested Capital (ROIC) 21.7% Excellent Strong capital efficiency
Return on Equity (ROE) 22.9% Excellent Efficient use of shareholder equity
Gross Margin 50.3% Excellent Strong pricing power
Operating Margin 11.2% Good Moderate operational efficiency

How Strong is AMAZON COM INC's Cash Flow Quality?

AMAZON COM INC generated $7.7B in free cash flow over the trailing twelve months, representing a 1.1% margin. Cash earnings quality is strong, with operating cash flow exceeding net income by 1.8x.

Key Metrics

Metric Value Rating Interpretation
Free Cash Flow Margin 1.1% Warning Thin cash margins
Free Cash Flow (TTM) $7.7B Good Positive cash generation
OCF/Net Income 1.8x Excellent High earnings quality
FCF Consistency (8Q) N/A Warning Variable cash flow

What is AMAZON COM INC's Financial Health?

AMAZON COM INC maintains a net cash position of $57.5B, providing significant financial flexibility.

Key Metrics

Metric Value Rating Interpretation
Debt to Equity 0.2x Excellent Conservative capital structure
Net Cash Position $57.5B Excellent Net cash positive

Is AMAZON COM INC Stock Overvalued or Undervalued?

AMAZON COM INC trades at a P/E of 31.7x, representing a premium to the sector median of N/A. Free cash flow yield of 0.3% reflects market expectations for growth.

Key Metrics

Metric Value Rating Interpretation
P/E Ratio 31.7x Adequate Premium valuation
EV/Sales 3.1x Good Growth premium priced in
FCF Yield 0.3% Warning Lower cash yield

Sector Rankings

Metric Value Percentile vs Median
Return on Invested Capital (ROIC) 21.7% Top 50% 1.3x above
Free Cash Flow Margin 1.1% Bottom 25% 0.2x below
Gross Margin 50.3% Top 50% 1.2x above
Operating Margin 11.2% Top 50% 1.5x above
Return on Equity (ROE) 22.9% Top 50% 1.5x above
P/E Ratio 31.7x N/A -

Rating Thresholds

Return on Invested Capital (ROIC)

Measures how efficiently a company uses its debt and equity capital to generate profits. ROIC above 15% typically indicates a competitive moat.

Rating Range Interpretation
Excellent > 20% Exceptional capital efficiency, strong competitive moat
Good 12% - 20% Above-average returns, sustainable competitive position
Adequate 8% - 12% Around cost of capital, moderate competitive position
Warning 4% - 8% Below cost of capital, value may be eroding
Red flag < 4% Significant capital destruction, fundamental issues

Current: 21.7% (Excellent - Top 50% of sector (median: 16.8%))

Free Cash Flow Margin

The percentage of revenue converted to free cash flow. Higher margins indicate stronger cash generation and business quality.

Rating Range Interpretation
Excellent > 20% Strong cash generation, high-quality business
Good 10% - 20% Healthy cash conversion
Adequate 5% - 10% Moderate cash generation
Warning 0% - 5% Thin cash margins, capital intensive
Red flag < 0% Cash burn, potential liquidity concerns

Current: 1.1% (Warning - Bottom 25% of sector (median: 4.9%))

Gross Margin

Revenue minus cost of goods sold as a percentage. Higher gross margins indicate pricing power and competitive advantage.

Rating Range Interpretation
Excellent > 50% Strong pricing power and competitive moat
Good 30% - 50% Healthy margins, differentiated product
Adequate 20% - 30% Moderate margins, competitive industry
Warning 10% - 20% Thin margins, commodity-like business
Red flag < 10% Very thin margins, structural challenges

Current: 50.3% (Excellent - Top 50% of sector (median: 43.7%))

Debt to Equity Ratio

Total debt divided by shareholders' equity. Lower ratios indicate more conservative financing and reduced financial risk.

Rating Range Interpretation
Excellent < 0.3x Conservative leverage, strong balance sheet
Good 0.3x - 0.7x Moderate leverage, healthy financial position
Adequate 0.7x - 1.5x Elevated leverage, monitor closely
Warning 1.5x - 3.0x High leverage, increased financial risk
Red flag > 3.0x Excessive leverage, potential distress risk

Current: 16.7% (Excellent)

P/E Ratio (Price-to-Earnings)

Stock price divided by earnings per share. Lower P/E may indicate undervaluation, while higher P/E suggests growth expectations.

Rating Range Interpretation
Excellent < 15x Attractively valued, potential opportunity
Good 15x - 25x Fair value for quality company
Adequate 25x - 35x Growth premium, justify with earnings growth
Warning 35x - 50x High expectations priced in
Red flag > 50x or negative Speculative valuation or losses

Current: 31.7x (Adequate)

Free Cash Flow Yield

Free cash flow per share divided by stock price. Higher FCF yield indicates better cash return relative to valuation.

Rating Range Interpretation
Excellent > 8% High cash return, potential value opportunity
Good 5% - 8% Solid cash yield
Adequate 3% - 5% Moderate cash return
Warning 1% - 3% Low cash yield, growth expectations
Red flag < 1% Minimal cash return to shareholders

Current: 0.3% (Red flag)


Frequently Asked Questions

Q: What is AMAZON COM INC's Return on Invested Capital (ROIC)?

AMAZON COM INC (AMZN) has a trailing twelve-month Return on Invested Capital (ROIC) of 21.7%. This compares above the sector median of 16.8%. An ROIC above 20% indicates exceptional capital efficiency and strong competitive advantages.

Q: What is AMAZON COM INC's Free Cash Flow Margin?

AMAZON COM INC (AMZN) has a free cash flow margin of 1.1%, generating $7.7 billion in free cash flow over the trailing twelve months. A thin FCF margin may indicate heavy reinvestment or operational challenges.

Q: Is AMAZON COM INC stock overvalued or undervalued?

AMAZON COM INC (AMZN) trades at a P/E ratio of 31.7x, which is above the sector median of N/A. The EV/Sales multiple is 3.1x. Free cash flow yield is 0.3%, reflecting growth expectations priced into the stock.

Q: What is AMAZON COM INC's revenue and earnings growth?

AMAZON COM INC (AMZN) grew revenue by 12.4% year-over-year. Earnings per share increased by 29.7% compared to the prior year. Solid growth above 10% suggests healthy business momentum.

Q: How does AMAZON COM INC compare to competitors in Consumer Discretionary?

Compared to other companies in Consumer Discretionary, AMAZON COM INC (AMZN) shows: ROIC of 21.7% is above the sector median of 16.8% (Top 42%). FCF margin of 1.1% trails the sector median of 4.9% (Bottom 19% of sector). Gross margin at 50.3% is 6.6 percentage points higher than sector peers. These rankings are based on MetricDuck's analysis of all Consumer Discretionary companies with available SEC filings.

Q: What warning signs should I watch for with AMAZON COM INC?

Investors in AMAZON COM INC (AMZN) should monitor these potential warning signs: 1) FCF margin is thin at 1.1%, leaving limited buffer for economic downturns. Regular monitoring of SEC filings and quarterly trends is recommended.


Data Source: Data sourced from 10-Q filed 2025-10-31. TTM metrics as of Q4 2025.

Methodology: Financial metrics calculated from SEC 10-K and 10-Q filings using standardized formulas. Sector comparisons use peer group based on SIC code.

This analysis is for informational purposes only and does not constitute investment advice.