Amazon Financial Report and Financial Analysis: 2015 to 2019

Amazon.com Financial Report and Financial Analysis started with an in-depth review of Amazon's 10k Annual report, specifically, Amazon's income statement and balance sheet. 

Next Paul Borosky, MBA., summarized their financial information and input it into a proprietary financial model, which shows their income statement and balance sheet trends as well as calculations for Amazon's financial ratios, and financial ratio trends covering 5 years.  

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Amazon.com Financial Report and Analysis by Paul Borosky, MBA.
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Each Public Company Financial Report will include:

  • Summarized income statement for the last 5 years.
  • Summarized balance sheet for the last 5 years.
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  • Five year’s worth of over twenty common financial ratios presented with formulas, calculations, and analysis tips for each ratio.
  • Line by line description, explanation, and analysis tip for most financial statement line items and financial ratios.
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Amazon.com Summary

Amazon.com's stock price, in February 2020, was at $2,155.67.  The previous year, its stock price  was $1,601.  This is a growth rate annually of 34.65%.  From an investor’s perspective, this growth rate well exceeds overall market returns.

Amazon.com has not paid out dividends in the last five years.  The zero dividend payment policy may be due to the company’s need for internal growth.  However, over the next several years, investors should expect some type of dividends to be paid once the organization reaches the mature phase of their business cycle. 

Amazon.com Income Statement Summary

Cost of Goods Sold

Amazon’s cost of goods has ranged from 59% of sales to 67% of sales.  The 59% of sales were registered in 2019.  This shows that the company is doing a better job of negotiating prices for raw materials.  Also, such a good showing in this line item may be a result of Amazon passing on raw material cost increases to their customers through higher prices.  Regardless, the organization seems to have found a functional business model that allows for continued improvement in the cost of goods area.

Amazon.com's Income Statement 2019

Column1 2019 2018 2017 2016 2015
Revenues                  280,522                  232,887                  177,866                  135,987                    107,006
COGS                  165,536                  139,156                  111,934                    88,265                      71,651
Gross Profit                  114,986                    93,731                    65,932                    47,722                      35,355
SG&A                      5,203                      4,336                      3,674                      2,432                        1,747
Depreciation                    21,789                    15,341                    11,478                      8,116                        6,281
R & D                    35,931                    28,837                    22,620                    16,085                      12,540
Other                         201                         296                         214                         167                           171
Operating Expenses                  265,981                  220,466                  173,760                  131,801                    104,773
EBIT                    14,541                    12,421                      4,106                      4,186                        2,233
Other Income                         203                        (183)                        (300)                           90                         (256)
Interest Expense                      1,600                      1,417                         848                         484                           459
EBT                    13,976                    11,261                      3,806                      3,892                        1,568
Taxes                      2,374                      1,197                         769                      1,425                           950
Net Income                   11,588                   10,073                     3,033                     2,371                          596

Amazon.com Balance Sheet Summary

Inventory

Amazon’s inventory has more than doubled in the last five years; in 2015, the company had $10.2 billion in inventory.  As of 2019, this line item grew to $20.5 billion.  The reason for the increase in inventory would be that the firm has been investing significantly in its smart home technologies like Alexa and its Echo line.  In the future, inventory may become an issue for the company.  This is because technology tends to go obsolete relatively quickly.  When the company is designing and making its own smart home equipment, obsolescence is a major threat.  With obsolescence comes elevated inventory holdings.

Amazon.com's Summary Balance Sheet 2019

Column1 2019 2018 2017 2016 2015
Cash                      36,092                  31,750                  20,522                  19,334                  15,890
Short Term Investment                      18,929                    9,500                  10,464                    6,647                    3,918
Account Receivable                      20,816                  16,677                  13,164                    8,339                    6,423
Inventory                      20,497                  17,174                  16,047                  11,461                  10,243
Other                              -                         -                         -                         -                         -
Current Assets                    96,334                75,101                60,197                45,781                35,705
Net PPE                      96,334                  61,797                  48,866                  29,114                  21,838
Goodwill                      14,754                  14,548                  13,350                    3,784                    3,759
Other                      16,314                  11,202                    8,897                    4,723                    3,445
Total Assets                  225,248              162,648              131,310                83,402                65,444
Accounts Payable                      47,183                  38,192                  34,616                  25,309                  20,397
Accrued Expense                      32,439                  23,663                  18,170                  13,739                  10,372
Accrued Taxes                              -                         -                         -                         -                         -
Notes Payable                              -                         -                         -                         -                         -
LT Debt - Current                              -                         -                         -                         -                         -
Other                              -                         -                         -                         -                         -
Total Current Liabilities                      87,812                  68,391                  57,883                  43,816                  33,887
LT Debt                      23,414                  23,495                  27,743                    7,694                    8,227
Other                      12,171                  27,213                  20,975                  12,607                    9,249
Total Liabilities                  163,188              119,099              103,601                64,117                52,060
Common Stock                               5                           5                           5                           5                           5
Treasury                      33,658                    1,837                    1,837                    1,837                    1,837
Retained Earnings                      31,220                  19,625                    8,636                    4,916                    2,545
Other                              -                         -                         -                         -                         -
Total Equity                    62,060                43,549                27,709                19,285                13,384
Total Equity & Liability                  225,248              162,648              131,310                83,402                65,444

Amazon.com Financial Ratio Summary and Analysis

Cash Ratio

The company’s cash ratio has fallen slightly over the last five years.  In 2015, its cash ratio was .47.  As of 2019, this line item fell to .41.  In other words, the company has approximately 40% of its current liabilities covered in cash.  This further strengthens the hypothesis that the company has little to fear from short-term insolvency.

Inventory Turnover

The company’s inventory turnover had increased from 10.45 in 2015 to 13.69 in 2019.  This ratio is actually quite surprising.  This is because the organization is investing significant funds in their smart home technology.  This type of technology often leads to obsolescence.  However, Amazon seems to not have an issue or problem with moving products in a timely manner.  Heck, they're actually doing better and better as time goes on.

Net Profit Margin

The organization's net profit margin had increased from .56% in 2015 to 4.1% in 2019.  Again, compared to other industry competitors, this net profit margin is actually below average, if not marginally average.  The company needs to take steps to mitigate costs in a timely manner to ensure streamlined business operations.  This action may lead to better operations as well as higher profits.

Amazon.com's Liquidity Ratios 2019

Ratios 2019 2018 2017 2016 2015
Current Ratio                           1.10                    1.10
Cash Ratio                           0.41                    0.46
Quick Ratio                           0.86                    0.85
Net Working Capital                       (2,217)                  3,746

Amazon.com Asset Utilization 2019

Ratios 2019 2018 2017 2016 2015
Total Asset Turnover                           1.25                    1.43
Fixed Asset Turnover                           2.91                    3.77
Days Sales Outstanding                         27.08                  26.14
Inventory Turnover                         13.69                  13.56
Accounts Receivable Turnover                         13.48                  13.96
Working Capital Turnover                     (126.53)                  62.17
AP Turnover                           5.95                    6.10
Average Days Inventory                           0.04                    0.04
Average Days Payable                           0.02                    0.02                        -                        -                        -

Amazon.com Profitability Ratios 2019

Ratios 2019 2018 2017 2016 2015
Return on Assets 5.14% 6.19%
Return on Equity 18.67% 23.13%
Net Profit Margin 4.13% 4.33%
Gross Profit Margin 40.99% 40.25%
Operating Profit Margin 5.18% 5.33%
Basic Earning Power 6.46% 7.64%
ROCE 10.58% 13.18%
Capital Employed                     137,436                94,257
ROIC 12.83% 16.94%

 

Amazon.com Long-term Debt 2019

Ratios 2019 2018 2017 2016 2015
Debt Ratio 10.39% 14.45%
Debt/Equity 37.73% 53.95%
Times Interest Earned                           9.09                    8.77