Amazon (NASDAQ:AMZN) has completely changed retail forever. Starting with books and now with their fire phone, if there is anything you need, AMZN probably has it in stock. AMZN even offers free two-day shipping to members of their Prime service. Its span of products and services is just as numerous as the tributaries of the Amazon River, the company's namesake. AMZN has the motto, and model, of "get big fast," which has spurred the company to the behemoth it is today.
AMZN is a company that continuously reinvests and reinvents itself. It is entreprenuerial to the core and offers services that have destroyed industries. Just ask Barnes and Noble (NYSE:BKS). My wife and I love Amazon, and I am guilty of ordering car parts from Amazon prime instead of walking to the AutoZone a couple of blocks away. The value and comfort for customers is almost priceless. However, this value and comfort doesn't always translate to investors.
- Warning! GuruFocus has detected 3 Warning Signs with AMZN. Click here to check it out.
- AMZN 15-Year Financial Data
- The intrinsic value of AMZN
- Peter Lynch Chart of AMZN
I primarily like to invest in stocks that can grow my wealth through both price appreciation and through the dividends it pays. AMZN doesn't pay out a dividend, as the company reinvests in itself in order to grow. I just don't think that it's OK to call a company a growth stock and therefore exempt it from being considered overvalued. Growth investors still have to consider whether it is prudent to buy a company at 13.8 times its book value and 141 times its free cash flow. I am in no way saying AMZN is going to go bankrupt or that it won't be able to battle against Disney and Hachette. What I am saying is that we cannot disregard the price we pay for these companies, while expecting to receive greater returns. Otherwise, we are really just speculating.