Amazon.com: Still Overvalued Even After a 20% Plunge

Shares of Amazon.com (AMZN) plunged over 20% yesterday as it announced a 58% profit decline. This is equivalent to a loss of about $2.8B in market value in less than 24 hours. Amazon is currently trading at 3 years low.

So, does this come as a surprise? No. Not for me at least.

Why?

From a quick glance at Yahoo! Finance, Amazon is overvalued. Most value investors would avoid Amazon, except for Bill Miller. Here are the company's fundamentals:

Market Cap (intraday): 11.08B
Enterprise Value (26-Jul-06)3: 13.96B
Trailing P/E (ttm, intraday): 34.07
Forward P/E (fye 31-Dec-07) 1: 31.56
PEG Ratio (5 yr expected): 3.02
Price/Book (mrq): 43.23
Enterprise Value/EBITDA (ttm)3: 23.777

Is it a good buy now after this "myocardial infarction-inducing" drop?

No, not in my opinion. It is still richly valued. The share has to slide further to entice me.

Is Amazon a Good Company?

Yes, without doubt, Amazon is a great company. I buy all my books from Amazon. Not only does Amazon sell cheaper books, but it offers free delivery too! Amazon has never disappointed me since I started using its service more than 5 years ago. Even Warren Buffett buys books from Amazon!

ROA (ttm): 10.39%
ROE (ttm): 409.88%

Conclusion: As Warren Buffett says, “It is more important to say "no" to an opportunity, than to say "yes."

AMZN 3-yr chart: