How Profitable Could Amazon Really Be?
Of all the large-cap tech stocks, Amazon (NASDAQ: AMZN) is the most difficult to value. But when valuation is difficult, that's ironically when investors should try their hardest to value a company, since there could be a significant mispricing.
A company's intrinsic value is the present value of all future cash flows. However, when a company intentionally spends all underlying profit in new growth areas, the "true" free-cash-flow margin is invisible.
That leaves investors guessing as to what Amazon's underlying profit margins could be if it tried to maximize profitability. Here's how investors should go about estimating it, and what Amazon is likely worth.
Source Fool.com