The main point of investing for the long term is to make money. But more than that, you probably want to see it move higher than the market average. Unfortunately for shareholders, while Amazon.com, Inc. (NASDAQ:AMZN) share price is up 41% over the past five years, underperforming the market’s returns. The past year hasn’t been great either, with the stock up only 3.5%.
Let’s take a look at the underlying fundamentals over the long term and see if they line up with shareholder returns.
See our latest analysis for Amazon.com
There’s no denying that markets are efficient at times, but prices don’t always reflect underlying business performance. A flawed but fair way of assessing how sentiment has changed around a company is to compare earnings per share (EPS) with the share price.
During the five years of share price growth, Amazon.com achieved compound earnings per share (EPS) growth of 0.5% per year. This EPS growth is slow compared to share price growth of 7% per annum over the same period. This shows that market participants these days give more importance to the company. That’s not surprising given its five-year track record of earnings growth. This optimism is reflected in its high P/E ratio of 274.79.
The company’s earnings per share (over time) is shown in the image below (click to see exact numbers).
earnings per share growth
It’s probably worth noting that CEOs are paid less than average at companies of similar size. But while CEO remuneration is always worth checking, the really important question is whether the company can generate earnings growth going forward. Before buying or selling a stock, we always recommend closely examining the historical growth trends available here.
a different perspective
It’s good to see that Amazon.com has rewarded shareholders with a total shareholder return of 3.5% over the past twelve months. Having said that, a five year TSR of 7% per annum is even better. The pessimistic view would be that the stock has had its best days, but on the other hand the price may only moderate while the business itself continues to execute. It is always interesting to track share price performance over the long term. But there are many other factors we need to consider to understand Amazon.com better. Case in point: We’ve seen 2 warning signs for Amazon.com you must know.
We’d like Amazon.com better if we saw some big insider buys. Check it out while we wait Free Notable, recent, growing list of companies with insider buyouts.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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This article from Simply Wall St is general in nature. We only provide commentary based on historical data and analyst forecasts using an unbiased methodology and our articles are not intended to provide financial advice. It is not a recommendation to buy or sell any stock, and does not take into account 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 Street has no position in any of the stocks mentioned.
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