If I could buy only shares of one share, the one I would choose is Amazon.com (NASDAQ: AMZN). Certainly, there are other companies that seem likely to grow much faster, and companies that pay dividends – while Amazon doesn’t (yet) – but Amazon has a lot to like about it, and its shares recently seem to be attractively priced also.
Here is a more detailed look at the company and why I am attracted to it.
Image source: Getty Images.
More than an e-commerce giant
Amazon is much more than just an online marketplace that you visit to buy all kinds of things. Here are just some many other operations under its roof:
- Whole Foods Market: a well-known luxury supermarket chain
- Amazon Web Services (AWS): an important cloud computing service platform
- Zappos: the leading online retailer of footwear and clothing
- Amazon Robotics: Robotics and Automation Technology
- Pharmacy Amazon: presents the pre-packaged doses of PillPack
- Twitch Interactive: a live video streaming platform with around 140 million active users per month in 2020
- Kindle: the main e-reader platform
- Alexa: a personal assistant with artificial intelligence
- Amazon Prime: a multifaceted membership program that offers videos, books, music and more
- GoodReads: social media for book lovers
- Audible: audiobooks
- Ring: home security equipment and services
- Fire, Fire TV and Echo tablets: Amazon’s own hardware devices
Growth potential
With a recent market value of $ 1.6 trillion, Amazon is one of the most valuable companies on the planet. However, it is still capable of growing at an impressive rate. In its last fiscal year, total revenue grew by 38%. This growth is likely to continue in the foreseeable future as well.
Many of Amazon’s businesses and initiatives are likely to deliver increasing dividends – such as Amazon Logistics, which is the transportation network that is strengthening its distribution centers and delivery capabilities to deliver more and more of the company’s products rather than relying on UPS, FedEx, or the U.S. Post Office to do much of that work. It’s kind of easy to imagine Amazon delivering to other companies and entities in the future as well.
Image source: Amazon.
The realm of supermarkets is clearly massive, and it is another industry in which Amazon is growing, partly through its wholly-owned Whole Foods Market, and also with its new Amazon Fresh outlets, which target more mainstream consumers. . With the pandemic taking many stores out of the market, Amazon has the opportunity to acquire valuable real estate for future Amazon Fresh locations. Many other Amazon operations also have great growth potential, such as Amazon Pharmacy.
Another very promising growth engine for Amazon is international expansion. For example, it is establishing itself in India, where it is partnering with tens of thousands of salespeople in hundreds of cities – and India has a very cities, with a total national population recently reaching 1.3 billion.
Unionization
Of course, no company or action is bulletproof, offering guaranteed growth. Every company faces at least some risks, and one that Amazon faces now is the threat of unionization, as warehouse workers in Alabama are trying to unionize.
Yes, a unionized workforce is likely to demand better working conditions and higher wages, but that may not be too bad for Amazon. On the one hand, it has deep pockets and can meet demands. Meanwhile, if these labor-intensive jobs become more attractive to workers, employee turnover is likely to decrease, which can save money for the company. And if Amazon is a generous employer, it can put pressure on smaller companies looking for the same workforce – which could serve Amazon well while it could hurt small businesses.
The price is right
Best of all, these growing stocks are being traded at a very reasonable price. Its recent price / earnings ratio (P / E) was high from 76, but this is much less than its five-year average of 156. Likewise, its recent price / cash flow ratio of 24 is well below five annual average of 31. Amazon’s shares appeared to be overvalued for much of their existence, but they continued to exceed expectations, growing rapidly. Those who waited for a more obvious bargain price often waited for years.
Consider Amazon’s shares for a place in your portfolio. It offers a lot of potential for growth and diversification.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even our own – helps all of us to think critically about investing and making decisions that help us become smarter, happier and wealthier.