My best stock to buy in the September clearance sale
The S&P 500The 2021 uptrend appears to be taking a break in September. The stock index is down about 1.5% since the start of the month. Some tech stocks saw even steeper declines, as evidenced by the 1.8% decline in the Nasdaq Composite during this period.
The liquidation of the market made some stocks more attractive. A growth stock that has fallen recently and deserves a closer look today is Amazon (NASDAQ: AMZN). The e-commerce and cloud computing giant’s stock may seem expensive at first glance. But a closer look at its underlying fundamentals shows a very interesting investment opportunity.
Explosive growth in results
With a market cap of $ 1.7 trillion, it can be hard to imagine how the company’s shares could rise significantly over time from here. Additionally, the company’s high price-to-earnings ratio of 59 may scare some investors. After all, that’s almost twice the average P / E of S&P 500 stocks.
But investors should realize that Amazon’s earnings are skyrocketing, easily justifying a high price-to-earnings ratio. The company’s last 12-month earnings per share of $ 57.43 today is up from $ 23.01 in 2019 and just $ 6.15 in 2017. In addition, analysts forecast growth stronger earnings per share in the coming years. Specifically, the current average analyst forecast is that Amazon’s earnings per share will grow by around 36% per year over the next five years.
This earnings momentum, of course, is driven by a combination of strong revenue growth and the inherent operating leverage that accompanies the scale-up of e-commerce and cloud computing companies. Highlighting how Help Amazon send more of its revenue to its bottom line, the company’s operating margin over the past 12 months has fallen from 5.2% a year ago to 6.7% today. hui.
The company’s sprawling operations also help defend Amazon stocks, giving the company the opportunity to expand into various vectors. This extended sales force helps both create the potential for additional revenue growth and mitigate some of the risk of Amazon’s revenue growth slowing too quickly. While Amazon’s online store segment has seen good growth in the company’s last quarter, with a year-over-year growth rate of 16%, the company is also recording high rates. Robust revenue growth in third-party vendor services (38%), physical stores (11%), subscription services (32%), cloud computing (37%) and “other” (87%).
Amazon’s “other” segment, in particular, deserves to be called a key growth opportunity. Management said the main driver of the segment is Amazon’s fast-growing advertising business. The nascent business is not only growing faster than Amazon’s consolidated revenue, but it has a higher profit margin.
Amazon Advertising is innovating at a rapid pace, launching more than 40 new self-service features and capabilities during the quarter, making it easier for sellers, businesses and authors to grow their businesses by helping customers to discover their brands and products, “said the head of Amazon. CFO Brian Olsavsky on the company’s latest earnings conference call.
With widespread momentum in its business and significant operating leverage, Amazon stock appears to be able to perform well over the long term from its current level – and a recent pullback in the e-commerce giant’s shares offers investors a good entry point.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.