Amazon.com, Inc. (AMZN)’s New $850 Billion Market

Valuation

Let’s face the fact: Amazon.com, Inc. (NASDAQ:AMZN) is expensive. There is no getting around it, you will pay large amounts to buy the stock. If measured by price-to-sales, or price-to-book, Amazon is about four times as expensive as Wal-Mart. The company is still growing, and certainly hasn’t reached its full potential. The past several paragraphs have shown what tremendous opportunities the company has to offer, which may be why the stock is so expensive. Its capital expenditures have increased 416% since 2010. It is putting money towards growth, and it is growing. That is what investors should want out of a company such as Amazon.

Costco Wholesale Corporation (NASDAQ:COST) and Wal-Mart are more established. Costco’s free cash flow yield is 3.4%, and Wal-Mart Stores, Inc. (NYSE:WMT)’s is 4.7%. Costco Wholesale Corporation (NASDAQ:COST) and Wal-Mart also have an earnings yield of 4.2% and 6.8% respectively. Costco’s P/E ratio is 9.2 higher than Wal-Mart’s, which is currently 14.7. Both of these companies offer dividends to shareholders, and have dividend yields of 1% and 2.3% respectively.

The Foolish bottom line

Amazon.com, Inc. (NASDAQ:AMZN) may be expensive, but with the efforts it is making in different areas, it should offer great growth for years to come. Could new services like AmazonFresh ever actually challenge large grocery stores like Wal-Mart Stores, Inc. (NYSE:WMT)? Amazon’s e-commerce model has revolutionized the retail industry and is continually threatening brick and mortar stores globally. Finally, despite the expensive premium, the majority of all-star players with the Motley Fool Caps believe Amazon will perform well, and even out perform the rest of the market.

The article Amazon’s New $850 Billion Market originally appeared on Fool.com and is written by Tyler Wofford.

Tyler Wofford has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and Costco Wholesale Corporation (NASDAQ:COST). The Motley Fool owns shares of Amazon.com, Inc. (NASDAQ:AMZN) and Costco Wholesale. Tyler is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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