Homework SourseCan someone interpret what this chart of stock valuation is
Can someone interpret what this chart of stock valuation is stating about Amazon?
Current Valuation
AMZN
Forward Valuation
AMZN
| AMZN | Industry Avg | S&P 500 | AMZN 5Y Avg* | |
|---|---|---|---|---|
| Data as of 10/03/2016, *Price/Cash Flow uses 3-year average. | ||||
| Price/Earnings | 208.1 | 44.7 | 19.8 | 630.8 |
| Price/Book | 24.0 | 9.0 | 2.8 | 15.2 |
| Price/Sales | 3.3 | 2.2 | 1.9 | 2.1 |
| Price/Cash Flow | 31.6 | 9.6 | 12.3 | 28.8 |
| Dividend Yield % | — | 0.3 | 2.3 | — |
| Price/Fair Value | Premium | — | — | — |
Solution
For the future valuation,
PEG ratio = (Future price/earning)/Growth
=> Growth = 76.3/PEG = 76.3/0.9 = 84.778
For current valuation,
PEG ratio = 208.1/84.778 = 2.455
Here change in P/E ratio reflects an excessively low stock price or is a reflection of less growth prospects for the company. In short Companie stock value may become down in future.
There are no stock dividend distributions by Amazon to its partners. Hence there is no market capitalization and therefore total value of company at the same time may not decreases the original cost basis per share.
