Amazon’s Skyhigh Valuation

I’ve been bashing Amazon.com (AMZN) for the past few months (and have been dead wrong). Still, I wanted to show you just how crazy the share price has gotten.
Here’s a chart of Amazon and its earnings-per-share.

The blue line is Amazon’s share price and it follows the left scale. The black and red line shows Amazon’s earnings-per-share and it follows the right scale. The black shows the trailing figures and the red is Wall Street’s projection.
The two axises are scaled at a ratio of 50-to-1 which means that Amazon’s P/E Ratio is exactly 50 whenever the lines cross.
A 50 P/E Ratio is very high, but even if we use that as a valuation, the stock is more than a year ahead of itself — even taking into account the tremendous growth forecast.

Posted by Eddy Elfenbein on December 8th, 2009 at 12:40 pm

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