I'm considering making an investment in Amazon.com and am trying to understand Amazon.com's valuation when compared to other companies. While recognizing that Amazon.com might be considered to be in a unique position, it does seem to me that one should be able to compare Amazon.com with Barnes & Noble and Borders. Both companies are in the book-selling business and both are, or will shortly be, aggressively pursuing the sale of books over the Internet.
I took each companies' latest quarterly report and found the following:
Barnes & Noble
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Amazon.com Quarter X Amazon.com
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Market Valuation
as at 02/28/98 $1,839.10 $2,331.50 1.27
Sales Revenue $66.01 $968.50 14.67
Net Asset Value $28.49 $456.00 16.01
Barnes & Noble closed near its all-time high.
Barnes & Noble, with sales revenues 15 times Amazon.com, operating profits compared to operating losses, and NAV 16 times Amazon.com, has a market valuation of only 1.27 times Amazon.com.
Borders
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Amazon.com Quarter X Amazon.com
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Market Valuation
as at 02/28/98 $1,839.10 $2,527.00 1.37
Sales Revenue $66.01 $769.10 11.65
Net Asset Value $28.49 $511.40 17.95
Borders closed near its all-time high.
Borders, with sales 11.65 times Amazon.com, operating profits compared to operating losses, and NAV 18 times Amazon.com, has a market valuation of only 1.37 times Amazon.com.
It seems to me that, if the market's valuation of Amazon.com is reasonable, then Barnes & Noble and Borders are grossly undervalued. However, if the market's valuation of Barnes & Noble and Borders is reasonable, then Amazon.com must be grossly overvalued.
Am I missing something? |
