Intrinsic value of Amazon.com - AMZN

Previous Close

$1,819.96

  Intrinsic Value

$2,661

stock screener

  Rating & Target

buy

+46%

Previous close

$1,819.96

 
Intrinsic value

$2,661

 
Up/down potential

+46%

 
Rating

buy

We calculate the intrinsic value of AMZN stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 883.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  39.30
  35.87
  32.78
  30.00
  27.50
  25.25
  23.23
  21.41
  19.77
  18.29
  16.96
  15.76
  14.69
  13.72
  12.85
  12.06
  11.36
  10.72
  10.15
  9.63
  9.17
  8.75
  8.38
  8.04
  7.74
  7.46
  7.22
  6.99
  6.80
  6.62
Revenue, $m
  247,767
  336,641
  447,003
  581,124
  740,958
  928,078
  1,143,656
  1,388,463
  1,662,893
  1,967,011
  2,300,610
  2,663,271
  3,054,435
  3,473,461
  3,919,687
  4,392,482
  4,891,286
  5,415,646
  5,965,239
  6,539,895
  7,139,609
  7,764,544
  8,415,039
  9,091,607
  9,794,933
  10,525,869
  11,285,432
  12,074,795
  12,895,287
  13,748,385
Variable operating expenses, $m
  239,562
  325,014
  431,126
  560,083
  713,762
  893,677
  1,100,954
  1,336,334
  1,600,197
  1,892,605
  2,212,024
  2,560,720
  2,936,822
  3,339,713
  3,768,757
  4,223,347
  4,702,944
  5,207,113
  5,735,543
  6,288,072
  6,864,694
  7,465,565
  8,091,013
  8,741,529
  9,417,773
  10,120,564
  10,850,879
  11,609,847
  12,398,746
  13,218,994
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  239,562
  325,014
  431,126
  560,083
  713,762
  893,677
  1,100,954
  1,336,334
  1,600,197
  1,892,605
  2,212,024
  2,560,720
  2,936,822
  3,339,713
  3,768,757
  4,223,347
  4,702,944
  5,207,113
  5,735,543
  6,288,072
  6,864,694
  7,465,565
  8,091,013
  8,741,529
  9,417,773
  10,120,564
  10,850,879
  11,609,847
  12,398,746
  13,218,994
Operating income, $m
  8,205
  11,628
  15,877
  21,042
  27,196
  34,401
  42,702
  52,129
  62,696
  74,406
  88,586
  102,551
  117,613
  133,748
  150,930
  169,135
  188,342
  208,533
  229,695
  251,823
  274,915
  298,979
  324,027
  350,078
  377,160
  405,305
  434,553
  464,948
  496,541
  529,390
EBITDA, $m
  21,582
  29,323
  38,936
  50,619
  64,542
  80,841
  99,619
  120,943
  144,847
  171,338
  200,396
  231,986
  266,059
  302,558
  341,427
  382,610
  426,059
  471,733
  519,606
  569,662
  621,900
  676,336
  732,997
  791,930
  853,194
  916,863
  983,025
  1,051,783
  1,123,252
  1,197,562
Interest expense (income), $m
  290
  1,336
  3,532
  6,327
  9,797
  14,014
  19,040
  24,924
  31,702
  39,400
  48,029
  57,591
  68,081
  79,484
  91,784
  104,960
  118,991
  133,857
  149,541
  166,029
  183,310
  201,379
  220,236
  239,886
  260,340
  281,614
  303,729
  326,712
  350,596
  375,416
  401,215
Earnings before tax, $m
  6,869
  8,095
  9,550
  11,245
  13,182
  15,361
  17,778
  20,426
  23,296
  26,377
  30,995
  34,470
  38,129
  41,964
  45,971
  50,145
  54,485
  58,992
  63,667
  68,513
  73,536
  78,743
  84,140
  89,738
  95,546
  101,576
  107,841
  114,352
  121,125
  128,175
Tax expense, $m
  1,855
  2,186
  2,579
  3,036
  3,559
  4,148
  4,800
  5,515
  6,290
  7,122
  8,369
  9,307
  10,295
  11,330
  12,412
  13,539
  14,711
  15,928
  17,190
  18,499
  19,855
  21,260
  22,718
  24,229
  25,797
  27,426
  29,117
  30,875
  32,704
  34,607
Net income, $m
  5,015
  5,910
  6,972
  8,209
  9,623
  11,214
  12,978
  14,911
  17,006
  19,255
  22,626
  25,163
  27,834
  30,634
  33,558
  36,606
  39,774
  43,064
  46,477
  50,015
  53,681
  57,482
  61,422
  65,509
  69,749
  74,151
  78,724
  83,477
  88,422
  93,568

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  182,854
  248,444
  329,891
  428,874
  546,833
  684,929
  844,027
  1,024,696
  1,227,227
  1,451,669
  1,697,867
  1,965,514
  2,254,195
  2,563,440
  2,892,758
  3,241,684
  3,609,805
  3,996,786
  4,402,390
  4,826,491
  5,269,084
  5,730,291
  6,210,361
  6,709,673
  7,228,733
  7,768,169
  8,328,732
  8,911,288
  9,516,817
  10,146,409
Adjusted assets (=assets-cash), $m
  182,854
  248,444
  329,891
  428,874
  546,833
  684,929
  844,027
  1,024,696
  1,227,227
  1,451,669
  1,697,867
  1,965,514
  2,254,195
  2,563,440
  2,892,758
  3,241,684
  3,609,805
  3,996,786
  4,402,390
  4,826,491
  5,269,084
  5,730,291
  6,210,361
  6,709,673
  7,228,733
  7,768,169
  8,328,732
  8,911,288
  9,516,817
  10,146,409
Revenue / Adjusted assets
  1.355
  1.355
  1.355
  1.355
  1.355
  1.355
  1.355
  1.355
  1.355
  1.355
  1.355
  1.355
  1.355
  1.355
  1.355
  1.355
  1.355
  1.355
  1.355
  1.355
  1.355
  1.355
  1.355
  1.355
  1.355
  1.355
  1.355
  1.355
  1.355
  1.355
Average production assets, $m
  60,207
  81,804
  108,622
  141,213
  180,053
  225,523
  277,909
  337,396
  404,083
  477,984
  559,048
  647,175
  742,228
  844,051
  952,484
  1,067,373
  1,188,583
  1,316,002
  1,449,553
  1,589,195
  1,734,925
  1,886,784
  2,044,854
  2,209,261
  2,380,169
  2,557,786
  2,742,360
  2,934,175
  3,133,555
  3,340,858
Working capital, $m
  -39,891
  -54,199
  -71,967
  -93,561
  -119,294
  -149,421
  -184,129
  -223,543
  -267,726
  -316,689
  -370,398
  -428,787
  -491,764
  -559,227
  -631,070
  -707,190
  -787,497
  -871,919
  -960,403
  -1,052,923
  -1,149,477
  -1,250,092
  -1,354,821
  -1,463,749
  -1,576,984
  -1,694,665
  -1,816,954
  -1,944,042
  -2,076,141
  -2,213,490
Total debt, $m
  65,414
  117,164
  181,426
  259,524
  352,593
  461,551
  587,079
  729,627
  889,424
  1,066,509
  1,260,759
  1,471,932
  1,699,702
  1,943,696
  2,203,528
  2,478,831
  2,769,278
  3,074,607
  3,394,628
  3,729,243
  4,078,449
  4,442,341
  4,821,117
  5,215,074
  5,624,612
  6,050,227
  6,492,511
  6,952,148
  7,429,911
  7,926,659
Total liabilities, $m
  144,272
  196,022
  260,284
  338,382
  431,451
  540,409
  665,937
  808,485
  968,282
  1,145,367
  1,339,617
  1,550,790
  1,778,560
  2,022,554
  2,282,386
  2,557,689
  2,848,136
  3,153,465
  3,473,486
  3,808,101
  4,157,307
  4,521,199
  4,899,975
  5,293,932
  5,703,470
  6,129,085
  6,571,369
  7,031,006
  7,508,769
  8,005,517
Total equity, $m
  38,582
  52,422
  69,607
  90,492
  115,382
  144,520
  178,090
  216,211
  258,945
  306,302
  358,250
  414,723
  475,635
  540,886
  610,372
  683,995
  761,669
  843,322
  928,904
  1,018,390
  1,111,777
  1,209,091
  1,310,386
  1,415,741
  1,525,263
  1,639,084
  1,757,362
  1,880,282
  2,008,048
  2,140,892
Total liabilities and equity, $m
  182,854
  248,444
  329,891
  428,874
  546,833
  684,929
  844,027
  1,024,696
  1,227,227
  1,451,669
  1,697,867
  1,965,513
  2,254,195
  2,563,440
  2,892,758
  3,241,684
  3,609,805
  3,996,787
  4,402,390
  4,826,491
  5,269,084
  5,730,290
  6,210,361
  6,709,673
  7,228,733
  7,768,169
  8,328,731
  8,911,288
  9,516,817
  10,146,409
Debt-to-equity ratio
  1.700
  2.240
  2.610
  2.870
  3.060
  3.190
  3.300
  3.370
  3.430
  3.480
  3.520
  3.550
  3.570
  3.590
  3.610
  3.620
  3.640
  3.650
  3.650
  3.660
  3.670
  3.670
  3.680
  3.680
  3.690
  3.690
  3.690
  3.700
  3.700
  3.700
Adjusted equity ratio
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  5,015
  5,910
  6,972
  8,209
  9,623
  11,214
  12,978
  14,911
  17,006
  19,255
  22,626
  25,163
  27,834
  30,634
  33,558
  36,606
  39,774
  43,064
  46,477
  50,015
  53,681
  57,482
  61,422
  65,509
  69,749
  74,151
  78,724
  83,477
  88,422
  93,568
Depreciation, amort., depletion, $m
  13,376
  17,696
  23,059
  29,578
  37,346
  46,440
  56,917
  68,814
  82,152
  96,932
  111,810
  129,435
  148,446
  168,810
  190,497
  213,475
  237,717
  263,200
  289,911
  317,839
  346,985
  377,357
  408,971
  441,852
  476,034
  511,557
  548,472
  586,835
  626,711
  668,172
Funds from operations, $m
  18,391
  23,605
  30,031
  37,786
  46,968
  57,653
  69,895
  83,726
  99,158
  116,187
  134,436
  154,598
  176,279
  199,444
  224,055
  250,080
  277,491
  306,264
  336,387
  367,853
  400,666
  434,839
  470,393
  507,361
  545,783
  585,708
  627,196
  670,312
  715,133
  761,739
Change in working capital, $m
  -11,254
  -14,309
  -17,768
  -21,594
  -25,733
  -30,126
  -34,708
  -39,414
  -44,183
  -48,963
  -53,709
  -58,388
  -62,977
  -67,463
  -71,842
  -76,120
  -80,307
  -84,422
  -88,484
  -92,520
  -96,554
  -100,615
  -104,730
  -108,927
  -113,235
  -117,681
  -122,290
  -127,088
  -132,099
  -137,349
Cash from operations, $m
  29,645
  37,914
  47,799
  59,380
  72,702
  87,780
  104,603
  123,139
  143,341
  165,150
  188,145
  212,987
  239,257
  266,907
  295,898
  326,200
  357,798
  390,686
  424,872
  460,373
  497,220
  535,453
  575,123
  616,288
  659,018
  703,389
  749,485
  797,400
  847,232
  899,088
Maintenance CAPEX, $m
  -8,655
  -12,041
  -16,361
  -21,724
  -28,243
  -36,011
  -45,105
  -55,582
  -67,479
  -80,817
  -95,597
  -111,810
  -129,435
  -148,446
  -168,810
  -190,497
  -213,475
  -237,717
  -263,200
  -289,911
  -317,839
  -346,985
  -377,357
  -408,971
  -441,852
  -476,034
  -511,557
  -548,472
  -586,835
  -626,711
New CAPEX, $m
  -16,934
  -21,596
  -26,818
  -32,592
  -38,840
  -45,470
  -52,385
  -59,488
  -66,686
  -73,901
  -81,064
  -88,127
  -95,053
  -101,823
  -108,433
  -114,889
  -121,209
  -127,419
  -133,551
  -139,642
  -145,730
  -151,859
  -158,070
  -164,406
  -170,908
  -177,617
  -184,574
  -191,815
  -199,380
  -207,303
Cash from investing activities, $m
  -25,589
  -33,637
  -43,179
  -54,316
  -67,083
  -81,481
  -97,490
  -115,070
  -134,165
  -154,718
  -176,661
  -199,937
  -224,488
  -250,269
  -277,243
  -305,386
  -334,684
  -365,136
  -396,751
  -429,553
  -463,569
  -498,844
  -535,427
  -573,377
  -612,760
  -653,651
  -696,131
  -740,287
  -786,215
  -834,014
Free cash flow, $m
  4,057
  4,276
  4,621
  5,064
  5,619
  6,299
  7,113
  8,070
  9,175
  10,433
  11,484
  13,050
  14,769
  16,638
  18,655
  20,814
  23,114
  25,551
  28,120
  30,821
  33,651
  36,609
  39,696
  42,911
  46,258
  49,737
  53,354
  57,112
  61,017
  65,075
Issuance/(repayment) of debt, $m
  40,671
  51,750
  64,262
  78,097
  93,069
  108,958
  125,528
  142,548
  159,797
  177,085
  194,250
  211,173
  227,770
  243,994
  259,832
  275,303
  290,448
  305,328
  320,021
  334,616
  349,206
  363,892
  378,775
  393,957
  409,538
  425,615
  442,284
  459,637
  477,763
  496,748
Issuance/(repurchase) of shares, $m
  5,859
  7,930
  10,214
  12,677
  15,267
  17,925
  20,591
  23,210
  25,728
  28,102
  29,321
  31,310
  33,078
  34,617
  35,928
  37,018
  37,899
  38,589
  39,106
  39,471
  39,706
  39,833
  39,873
  39,846
  39,773
  39,670
  39,555
  39,442
  39,345
  39,276
Cash from financing (excl. dividends), $m  
  46,530
  59,680
  74,476
  90,774
  108,336
  126,883
  146,119
  165,758
  185,525
  205,187
  223,571
  242,483
  260,848
  278,611
  295,760
  312,321
  328,347
  343,917
  359,127
  374,087
  388,912
  403,725
  418,648
  433,803
  449,311
  465,285
  481,839
  499,079
  517,108
  536,024
Total cash flow (excl. dividends), $m
  50,586
  63,956
  79,096
  95,838
  113,955
  133,181
  153,233
  173,827
  194,700
  215,619
  235,056
  255,534
  275,617
  295,249
  314,414
  333,135
  351,461
  369,467
  387,247
  404,907
  422,563
  440,334
  458,344
  476,715
  495,569
  515,023
  535,193
  556,191
  578,125
  601,099
Retained Cash Flow (-), $m
  -10,873
  -13,839
  -17,185
  -20,885
  -24,889
  -29,138
  -33,570
  -38,121
  -42,734
  -47,357
  -51,948
  -56,473
  -60,912
  -65,250
  -69,486
  -73,623
  -77,674
  -81,653
  -85,582
  -89,485
  -93,387
  -97,315
  -101,295
  -105,355
  -109,522
  -113,821
  -118,279
  -122,919
  -127,767
  -132,844
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  39,713
  50,117
  61,911
  74,953
  89,066
  104,043
  119,663
  135,706
  151,966
  168,262
  183,108
  199,060
  214,705
  229,998
  244,928
  259,512
  273,787
  287,814
  301,665
  315,422
  329,175
  343,019
  357,049
  371,360
  386,047
  401,202
  416,915
  433,272
  450,358
  468,255
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  38,076
  45,880
  53,879
  61,716
  69,037
  75,508
  80,843
  84,820
  87,297
  88,213
  86,955
  84,946
  81,635
  77,214
  71,907
  65,947
  59,572
  53,004
  46,448
  40,081
  34,048
  28,462
  23,401
  18,914
  15,018
  11,705
  8,948
  6,703
  4,916
  3,526
Current shareholders' claim on cash, %
  97.9
  96.0
  94.1
  92.4
  90.9
  89.5
  88.3
  87.1
  86.1
  85.2
  84.4
  83.6
  83.0
  82.4
  81.8
  81.3
  80.9
  80.5
  80.1
  79.8
  79.5
  79.2
  78.9
  78.7
  78.5
  78.3
  78.1
  77.9
  77.7
  77.6

Amazon.com, Inc. offers a range of products and services through its Websites. The Company operates through three segments: North America, International and Amazon Web Services (AWS). The Company's products include merchandise and content that it purchases for resale from vendors and those offered by third-party sellers. It also manufactures and sells electronic devices. The Company, through its subsidiary, Whole Foods Market, Inc., offers healthy and organic food and staples across its stores. The Company also offers a range of products like whole trade bananas, organic avocados, organic large brown eggs, organic responsibly-farmed salmon and tilapia, organic baby kale and baby lettuce, animal-welfare-rated 85% lean ground beef, creamy and crunchy almond butter, organic gala and fuji apples, organic rotisserie chicken.

FINANCIAL RATIOS  of  Amazon.com (AMZN)

Valuation Ratios
P/E Ratio 366.1
Price to Sales 6.4
Price to Book 45
Price to Tangible Book
Price to Cash Flow 52.8
Price to Free Cash Flow 89.4
Growth Rates
Sales Growth Rate 27.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 46.8%
Cap. Spend. - 3 Yr. Gr. Rate 14.4%
Financial Strength
Quick Ratio 6
Current Ratio 0
LT Debt to Equity 78.9%
Total Debt to Equity 100.4%
Interest Coverage 14
Management Effectiveness
Return On Assets 3.4%
Ret/ On Assets - 3 Yr. Avg. 1.5%
Return On Total Capital 7.2%
Ret/ On T. Cap. - 3 Yr. Avg. 2.7%
Return On Equity 14.5%
Return On Equity - 3 Yr. Avg. 5.7%
Asset Turnover 1.8
Profitability Ratios
Gross Margin 35.1%
Gross Margin - 3 Yr. Avg. 32.5%
EBITDA Margin 9%
EBITDA Margin - 3 Yr. Avg. 7.3%
Operating Margin 3.1%
Oper. Margin - 3 Yr. Avg. 1.8%
Pre-Tax Margin 2.9%
Pre-Tax Margin - 3 Yr. Avg. 1.4%
Net Profit Margin 1.7%
Net Profit Margin - 3 Yr. Avg. 0.7%
Effective Tax Rate 36.6%
Eff/ Tax Rate - 3 Yr. Avg. -17.8%
Payout Ratio 0%

AMZN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AMZN stock intrinsic value calculation we used $177866 million for the last fiscal year's total revenue generated by Amazon.com. The default revenue input number comes from 0001 income statement of Amazon.com. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our AMZN stock valuation model: a) initial revenue growth rate of 39.3% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for AMZN is calculated based on our internal credit rating of Amazon.com, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Amazon.com.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of AMZN stock the variable cost ratio is equal to 96.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for AMZN stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Amazon.com.

Corporate tax rate of 27% is the nominal tax rate for Amazon.com. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the AMZN stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for AMZN are equal to 24.3%.

Life of production assets of 4.1 years is the average useful life of capital assets used in Amazon.com operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for AMZN is equal to -16.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $27709 million for Amazon.com - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 485.227 million for Amazon.com is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Amazon.com at the current share price and the inputted number of shares is $883.1 billion.

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