Shareholder Analysis

At the end of a financial year, corporate organizations usually provide information on the performance of their operation in the previous years and what they intend to do in the new fiscal year. It is possible to carry out the operations through a consideration of several factors. The factors include the market conditions and the economic and operational factors. These factors are essential in measuring the level of performance of an organization and what it intends to do in the future.

Compare market conditions with the company’s performance for 2017. Conclude how the market conditions that year influenced the company’s performance, such as interest rates, Federal Reserve Bank monetary policy changes, or other market conditions relevant to the company you selected.

Amazon uses the market conditions and the operational performance by reviewing the income and cash flow statements. The evaluation of the assets took place at the lowest level of Amazon company represented by the individual stores. The conditions will largely be influenced by the geographical location of each of the stores for Amazon (Dobbs, 2014). The variables can lead to management over the stores to evaluate the level of performance concerning returns of profits. In 2017, the annual revenue for Amazon was $229,234 million, and it increased to $260,174 by 2019. There are four different market structures that Amazon can consider using. There is perfect competition, monopoly, Oligopoly, and monopolistic. Amazon takes advantage of both the Oligopoly and monopolistic market structure. The focus is to gain the needed competitive advantage.

Evaluate economic conditions that influence company performance. Consider political, environmental, currency (money), global economics, and government influences on economic conditions.

In any organization, several economic conditions impact its success. For Amazon, there are a few that will affect their level of performance. They include the interest rates, income, wealth, employment inflation, and the behavior of other organizations that are interested in purchasing shares from Amazon. In 2017, Amazon had a significant influence on job creation as it was a time when employment in the United States was re-establishing. In 2017, the interest rate for Amazon was 2.3% which was approximately 9% less than what the entire industry was experiencing (Zeis, 2018). The success of Amazon has been dramatically influenced by its ability to manage external factors. They have a strategic team whose primary responsibility is to exploit the available opportunities and offer protection for their business operation from external threats.

The main threat that Amazon faces is from Information Technology and customer electronic industries. The high economic growth in the Asian communities is an excellent opportunity for Amazon to increase its revenue by making sales in foreign markets (Jensen, 2019). The availability of a substantial disposable income creates a more diverse opportunity for Amazon to make sales of high-quality products. In general, several economic conditions were a vital sector of the success of Amazon in 2017.

Analyze year-over-year performance between 2016 and 2017. Consider key metrics or ratios such as trailing PE ratio, forward PE ratio, price to book, return on assets, and return on equity in your conclusions.

There is a visible change when comparing the financial performance of Amazon in 2016 and 2017. The change is positive as it shows the progress that the company has made in its fiscal performance. The current ratio is termed the liquidity ratio that will determine the capabilities of a company to meet all its short-term goals and obligations (Zeis, 2018). At the end of the 2016 financial year, the current ratio was 1.23, while that of the years ended 2017 was 1.24. There is a slight increase in the current ratio, which indicates the lousy ability of the company to pay off its short-term debts. A healthy current ratio should range between 1.5% and 3%. At the end of the 2016 financial year, its current assets for Amazon were $13.33 billion, and the value of its current liabilities was $84.13 billion. In 2017, the current assets were $143.81 billion, while that of the current liabilities was $115.79 billion (Zeis, 2018). The year 2017 ended with a return on assets value standing at 14.13% compared to 2016, which was 13.83%. That indicates that Amazon was less profitable in 2017 in terms of its total assets than in the 2016 financial year.

The per-earnings ratio for the year ended 2016 was 13.39, while that of the year ended 2017 was 17.06. The per-earnings ratio indicates whether or not the stocks in the company are either overvalued or undervalued. The outcomes of Amazon indicate that with time the value of a stock is Amazon is being valued, and they are selling at a much higher price since there is an increase in the per-earnings ratio. The price-to-book ratio for the years ended 2016 was 4.44, while that of 2017 was 6.02 (Zeis, 2018). The outcomes indicate a tremendous increase in the price-to-book ratio. That shows that the value of stocks in Amazon is of high value, and any investment into the company will yield high outputs.

A comparison between the performance of Amazon in 2016 and 2017 indicates that the years 2016 were more prosperous. However, in the industry, they are still among the best companies to consider investing in. That can be achieved by buying stocks in the company valued and selling at a much higher price. They have had a good performance in the last ten years. It is estimated that the trend will continue in the coming years. The increase in performance level is attributed to the market, and economic factors discussed.

References

Dobbs, M. (2014). Guidelines for Applying Porter’s Five Forces Framework: A Set of Industrial Analysis Templates, Competitive Review, 24(1), 32-45.

Jensen, H. B. (2019). Exploring the Financial and Accounting Reporting Standards and Principles under US GAAP (Doctoral dissertation, The University of Mississippi).

Zeis, M. (2018). Empirical Analysis of Dynamic Pricing on the “Amazon.de” Marketplace. Berlin School of Economics and Law, Pp. 1-52.

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