Whoa Rob! You're throwing the kitchen sink at me.
We were talking about the difference in Gross Profit (Margin) of the two companies which is substantial and, I maintained, already factored into the stock price, and I used price times sales as a comparison to prove my point. According to WSRN.com today Amazon's PXS is 25.57, Yahoo!'s is 74.69. It's a pure coincidence that these numbers somewhat mirror gross profit, Amazon 22.1% (1Q98) as you point out, and Yahoo! at 88.5% (2Q98).
I said and still believe that the market values a high margin company greater than a low margin company as the above demonstrates. A further demonstration is the Gross Profit number itself. Amazon and Yahoo! are similar size companies in this regard. 1Q98 Amazon GP = $19,321; Yahoo! GP = $26,289. Therefore market cap divided by gross profit would show an even greater disparity between the two. This is remarkable and even more so in light of the fact that, in terms of gross profit, Amazon's 1Q98 growth rate year-to-year was 449%, as you pointed out, and Yahoo!'s was only 205%.
Bottom line: Yahoo! is a higher margin company than Amazon, and this fact is already reflected in total market capitalization of the two companies. |
