Prediction: This Will Be Amazon Stock's Next Move
Predicting the movements of any particular stock is challenging, but historically it's been easier with Amazon (NASDAQ: AMZN) stock. A pattern emerged years ago showing a strong correlation between Amazon's price per share and its operating profit.
It might seem like calculating a business' profits is a straightforward process. But in reality, there are multiple ways of looking at things. There are widely used accounting methods that take everything into account. But some businesses make long-term strategical moves that reduce accounting profits right now. Adjusting for these kind of things can paint a more accurate picture of the company. This is why multiple profit metrics are relevant to investors.
For Amazon, the operating profit metric looks at what the business is earning before factoring in other things such as interest expenses and taxes. Over the last decade, when operating profit rises, Amazon stock goes up most of the time, and vice versa, as the chart below shows.
Source Fool.com
