Buying shares in the best businesses can build meaningful wealth for you and your family. And highest quality companies can see their share prices grow by huge amounts. To wit, the Amazon.com, Inc. ((NASDAQ:AMZN)) share price has soared 427% over five years. And this is just one example of the epic gains achieved by some long term investors. On the other hand, we note it’s down 9.4% in about a month. We note that the broader market is down 1.3% in the last month, and this may have impacted Amazon.com’s share price.
See our latest analysis for Amazon.com
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).
During five years of share price growth, Amazon.com achieved compound earnings per share (EPS) growth of 102% per year. This EPS growth is higher than the 39% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. Of course, with a P/E ratio of 70.33, the market remains optimistic.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We’re pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It’s always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of Amazon.com’s earnings, revenue and cash flow.
A Different Perspective
We’re pleased to report that Amazon.com shareholders have received a total shareholder return of 58% over one year. That’s better than the annualised return of 39% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Before deciding if you like the current share price, check how Amazon.com scores on these 3 valuation metrics.
We will like Amazon.com better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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