FIN302 Investment Selection
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FIN 302
Investment Selection
Professor: Ahmad Rawish
February 22, 2021
As a potential investor, my choice for an investment is Amazom.com, Inc. (AMZN). My reasoning
is based on its retail popularity and its amazing online sales. Amazon is a highly speculative investment
with a market cap over $1 trillion. Since COVID-19, Amazon made major stives, and demonstrated great
efforts to combat the pandemic.
With many people working from home and more businesses
computerizing their operations, the company has become a clear leader with the cloud computing
services. Also, Amazon launched a pharmacy which will grow the stock for years. And since many
consumers are purchasing online, Amazon’s advertising revenue is set to flourish. The PE ratio is a simple
way to calculate whether the stock is over or under valued, Amazon PE ratio as of February 19, 2021 is
77.81. As of today, the company is trading at a price of $3,249. I am not considered at all; the high value
lets me know that the company is projected perform well in the future.
3,249.90
USD
−78.33 (2.35%)
Closed: Feb 19, 7:56 PM EST ·
Disclaimer
After hours 3,248.00
−1.90 (0.058%)
Amazon.com Market Cap:
1.637T for Feb. 19, 2021
Like with any company there are many risks associated with the return of the investment.
Amazon’s major risk is its competition. Wal-Mart stores Inc. and Target Corporation are known to be the
two high competitors in the merchandise retail industry.
Competitive pricing is a key example of threats
that can change Amazons stock market. If more companies decided to price match Amazon, then it
potentially lowers the number of purchases made through Amazon. But the potential profits the
company have are associated with the robust ecosystem that continues to attract new customers and
sellers to its platform. The company is investing heavily in future growth areas like third-party seller
services subscription and services that are likely to double digits soon.
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Reference Page
1. Google.com. 2021. [online] Available at:
https://www.google.com/finance/quote/AMZN:NASDAQ?
sa=X&ved=2ahUKEwiwg8v93PzuAhWYFlkFHQ9cAsIQ3ecFMAB6BAgCEBo
.
2. Finance.yahoo.com. 2021. Yahoo is now a part of Verizon Media. [online] Available at:
https://finance.yahoo.com/quote/AMZN/financials?p=AMZN.
3. Macrotrends.net. 2021. Amazon Balance Sheet 2005-2020 | AMZN. [online] Available at:
https://www.macrotrends.net/stocks/charts/AMZN/amazon/balance-sheet
.
4. Investopedia. 2021. The Biggest Risks of Investing in Amazon Stock. [online] Available at:
https://www.investopedia.com/articles/markets/100215/biggest-risks-investing-amazon-
stock.asp#citation-16
.
5. Healy, W., 2021. Better Buy: Amazon.com vs. Walmart | The Motley Fool. [online] The Motley Fool.
Available at: <https://www.fool.com/investing/2021/02/20/better-buy-amazoncom-vs-walmart/>.
Appendix
Five financial ratios: liquidity, solvency, profitability, efficiency, and coverage
Liquidity: Current Ratio = Current Assets / Current Liabilities
2019: 96,334 / 87,812 = 1.097
2020: 132,733 / 126,385 = 1.050
Solvency: Debt to Equity ratio = Total Liabilities / Total Equity
2019: (225,248 - 62,060) / 62,060 = 163,188 / 62,060 = 2.6295
2020: (321,195 - 93,404) / 93,404 = 2.43877
Above are the Current Ratios for two years. The ratios are greater than 1, which means
they have more Current Assets than Current Liabilities, so liquid enough to meet all short-term
obligations. The Solvency ratios look at how much the company is using debt and one common
one is the Debt-to-Equity ratio. So here our Liabilities (debt) is over 2 times bigger than our
Equity, so that is a fair amount of debt. It is best to have more equity than debt, however, some
debt is fine but too much makes a company riskier.
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Related Questions
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State of Nature
Alternatives
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Step 1 of 2: What should Monique's decision be using the Hurwicz Criterion strategy and an à = 0.55?
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September 2019 $4,500,000
September 2020. $5,050,000
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It is now 2024. You have been assigned as a financial advisor of a Philippine start-up company They assigned you to value its
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Futher assume that the company will nat exist beyond 2023, meaning the going concem principle will not apply.
Also assume that the client wants you to use the dividend discount model for this project.
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6,458,000.0
2019
7,412,000.0
2020
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30.0%
38.0%
40.0%
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29.0%
21.0%
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