For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on Amazon.com, Inc. (NasdaqGS:AMZN) useful as an attempt to give more color around how Amazon.com is currently performing.
Were AMZN's earnings stronger than its past performances and the industry?
AMZN's trailing twelve-month earnings (from 30 September 2019) of US$11b has jumped 27% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 64%, indicating the rate at which AMZN is growing has slowed down. To understand what's happening, let’s take a look at what’s transpiring with margins and whether the whole industry is experiencing the hit as well.
In terms of returns from investment, Amazon.com has invested its equity funds well leading to a 20% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 6.1% exceeds the US Online Retail industry of 5.2%, indicating Amazon.com has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Amazon.com’s debt level, has increased over the past 3 years from 11% to 11%.
What does this mean?
Amazon.com's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research Amazon.com to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for AMZN’s future growth? Take a look at our free research report of analyst consensus for AMZN’s outlook.
- Financial Health: Are AMZN’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 30 September 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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