Amazon.com Inc (AMZN)

Conclusion

Amazon.com Inc (AMZN.US) runs online and physical retail, third-party seller services, advertising, subscriptions and the Amazon Web Services cloud business. At 266.93 USD per share on 2026-11-09, the company has a market capitalisation of 2.89 trillion USD and an enterprise value of 3.04 trillion USD.

The verdict is undervalued. The price-to-earnings ratio of 21.4x sits well below its ten-year median of 79.2x, and the enterprise value to EBITDA of 11.8x sits below its median of 27.5x. The fair value band runs from 575.21 to 862.82 USD with a midpoint of 719.02 USD, which is also the fair value from historical multiples, giving a margin of safety of 169.4% at the current price. The discounted cash flow value is not available because trailing free cash flow is negative, and the growth implied by the price is not available either. Over five years, revenue compounded at 13.2% and earnings per share at 28.0%.

The strongest supports are ROIC of 18.6% against a WACC of 11.7%, an Altman Z-score of 4.27 and interest coverage of 39.8x. The weakest numbers are trailing free cash flow conversion of -34.8%, free cash flow after stock-based compensation of -66.8 billion USD and a current ratio of 0.99x.

Financial health

Financial strength is green, held up by an Altman Z-score of 4.27, net debt to EBITDA of 0.61x and interest coverage of 39.8x, while the current ratio of 0.99x is neutral. The quick ratio is 0.82 and debt to equity is 0.44. The Altman Z-score falls in the safe zone, but that model was designed for manufacturers and Amazon is mainly a retailer and cloud provider, so read it with that caveat. Insolvency risk: low, about 0.05% by the estimate of the Ohlson model over one to two years, based on figures as of 2025-12-31.

Earnings quality

Earnings quality is red, pulled down by trailing free cash flow conversion of -34.8%, against 20.8% over five years, and by free cash flow after stock-based compensation of -66.8 billion USD. The accrual ratio is -8.6% and stock-based compensation equals 2.5% of revenue. The share count has grown at 1.2% a year over five years, so there have been no net buybacks. The Piotroski score is 6 out of 9. The Beneish M-score is not available. Earnings beat expectations in 6 of the last 8 quarters, with an average surprise of 20.4%. Current-year estimates rose 2.4% over 90 days with no revisions in the last 30 days. Next-year estimates rose 1.9% over 90 days, with 19 upward and 10 downward revisions in the last 30 days.

Profitability

Profitability is green. The operating margin is 13.1% against a ten-year median of 5.3%, the net margin is 16.9% against 4.8%, and the gross margin is 51.4% against 41.5%. Margin stability is 0.51. ROIC of 18.6% against a WACC of 11.7% gives a ROIC minus WACC of 6.9 percentage points, and the five-year median ROIC is 12.6%. Return on equity is 22.0%. The DuPont split for 2025 shows a net margin of 10.8%, an asset turnover of 0.88x and an equity multiplier of 1.99x, so part of the return on equity comes from leverage, though the return on capital remains positive.

Growth

Growth is green. Revenue compounded at 11.7% over three years, 13.2% over five years and 21.0% over ten years, and it grew in all 10 of 10 comparable years. Earnings per share compounded at 28.0% over five years and 60.7% over ten. Free cash flow per share fell at 22.5% a year over five years and rose 0.2% a year over ten. The estimated growth in earnings per share for next year is 1.3%, which is neutral.

Valuation

Valuation is green. The price-to-earnings ratio of 21.4x compares with a ten-year median of 79.2x, a premium of -73.0%. The enterprise value to EBITDA of 11.8x compares with 27.5x, a premium of -57.1%, and the price-to-book ratio of 4.70x compares with 14.03x, a premium of -66.5%. The price-to-sales ratio of 3.62x compares with 3.47x, a premium of 4.2%. The free cash flow yield is -1.6% and the earnings yield is 4.7%. The fair value band runs from 575.21 to 862.82 USD with a midpoint of 719.02 USD and a margin of safety of 169.4%. This is an order of magnitude built on fixed assumptions, including a 5% equity risk premium and capped growth, not a price target. The discounted cash flow value is not available because trailing free cash flow is negative, although the input uses a discount rate of 12.39% and terminal growth of 2.5%. The growth implied by the price in a reverse DCF is not available. The company pays no dividend.

Risks

Negative trailing free cash flow means operating cash has not covered investment over the last twelve months. If that persists, buybacks and debt reduction would have to come from existing cash or new borrowing, although net debt to EBITDA is currently 0.61x. A current ratio of 0.99x means short-term obligations are roughly matched by current assets, so a drop in cash would tighten liquidity quickly. Comparisons with the company's own ten-year medians show a discount, but those medians reflect different margins and capital needs, so they are not a measure of value against peers. Not available: the discounted cash flow value, the reverse DCF growth, and the Beneish M-score. This analysis has no debt maturity schedule, no revenue by segment and no peer comparison.