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'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
|R & D||35,931||28,837||22,620||16,085||12,540|
Amazon.com Balance Sheet Summary
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
|Short Term Investment||18,929||9,500||10,464||6,647||3,918|
|LT Debt - Current||-||-||-||-||-|
|Total Current Liabilities||87,812||68,391||57,883||43,816||33,887|
|Total Equity & Liability||225,248||162,648||131,310||83,402||65,444|
Amazon.com Financial Ratio Summary and Analysis
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.
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
|Net Working Capital||(2,217)||3,746|
Amazon.com Asset Utilization 2019
|Total Asset Turnover||1.25||1.43|
|Fixed Asset Turnover||2.91||3.77|
|Days Sales Outstanding||27.08||26.14|
|Accounts Receivable Turnover||13.48||13.96|
|Working Capital Turnover||(126.53)||62.17|
|Average Days Inventory||0.04||0.04|
|Average Days Payable||0.02||0.02||-||-||-|
Amazon.com Profitability Ratios 2019
|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%|
Amazon.com Long-term Debt 2019
|Times Interest Earned||9.09||8.77|