Andy Zaky: ‘The Amazing Amazon Stock Bubble’

Andy Zaky, writing for Fortune:

While Amazon continues to execute at a very high level — yesterday it reported better than expected sales growth of 39% and earnings growth of 16% — the stock still trades at a very lofty 67 P/E ratio. That’s more than triple Apple’s 20.1 P/E ratio, or Google’s 24.6 P/E ratio. Even more striking is that the company trades at 2.31 times its expected 5-year growth rate, which indicates that the stock has gotten way ahead of itself. Ideally, a company should trade at no more than a 1:1 PEG ratio unless the company has a consistently proven track record (like Apple) of far exceeding analyst expectations.

Friday, 22 October 2010