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Altria (NYSE:MO), Amazon (NASDAQ:AMZN) and Starbucks (NASDAQ:SBUX) recently reported earnings. Valuations and analysis suggest investors should take profits on Altria and Starbucks and buy shares of Amazon. (Click charts to enlarge.)

Altria - Overvalued (Sell)

  • Tobacco is a concentrated industry with strong pricing power.
  • The industry is mature with little to no growth and high barriers to entry.
  • Revenue (TTM)/share increased the last few quarters to Q4 2010 levels.
  • Book value/share has declined since the start of 2011.
  • Price/sales and price/book value have increased as share price has risen.
  • Valuations are nearing peaks as fundamentals aren't confirming the rise in share price.
  • Share are trading above the rising 50-day moving average in the markup phase which comes before a period of distribution.
  • Historically, tobacco enterprises have been one the best creators of value for investors.

Amazon - Undervalued (Buy)

  • High-quality earnings suggests the company isn't fudging earnings.
  • Historically, retail is fragmented with weak pricing power.
  • Current assets greater than current liabilities suggests liquidity.
  • The firm's financial leverage level implies continuing operations (solvency).
  • Revenue is increasing as the companies continues to grow net sales.
  • Book value-per-share has declined in recent quarters.
  • Price/sales and price/book value ratios are off of recent peaks and could rise.

Starbucks - Overvalued (Sell)

  • The restaurant industry is fragmented with weak pricing power.
  • Coffee prices are declining, that will decrease cost of sales.
  • Earnings are high quality; the firm generates enough cash from operations for expenditure on investing and financing.
  • Revenue-per-share is increasing as operating income-per-share is increasing.
  • The valuation ratios have expanded and are due to contract; while revenue and operating income growth justify higher valuations, valuations are near peaks and price should decline.

Disclosure: I am long DIA, SPY, QQQ.

Additional disclosure: I will be active (long or short) Dow Jones industrial average, S&P 500 & Nasdaq futures contracts within the next 72 hours.

Source: Analysis And Valuation: Altria, Amazon, Starbucks