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A visual perspective on the market value of Amazon (AMZN)

|Includes:Amazon.com, Inc. (AMZN), BBY, COST, DELL
I had some time to kill this weekend and I did it by analysing one of analysts' favorite stock, Amazon. I think Amazon is a great company with amazing prospects but I do think this company is overpriced as most top of the line growth companies tend to be.

Amazon is growing very fast with a growth rate over 40%, on which most analysts justify the P/E ratio over 70 for the last 4 quarters. To be able to visualize what the market value of Amazon represents, I compared it to other companies. (See table below)

To build this table, I tried to find compagnies as similar as possible to Amazon that together add up to the same market value as Amazon. In the end, I chose Best Buy for its electronics, Dell because they sell a lot over the internet and Costco for other products that Amazon sells. 
 
When I look at the following comparison and find out that Amazon is worth as much as BBY, COST and DELL aggregated, I come to think that Amazon's revenue will have to increase a lot to justify this high market value. Its margin is 1.6 times higher than the average of the 3 other companies yet it only sells about 15% of what the 3 companies sell together. Amazon's growth is a lot higher but this difference in growth will need to continue for a long time. To keep growing enough to justify its market price, Amazon will need a bumpless future where it keeps innovating and where the current trend in internet sales stays very strong. Also, if a successful internet retailer was to appear, it would hurt those prospects.

Ticker MV(NYSE:B) Sales Earnings Gross
margin
Net
margin
4 quarters
 ending:
Amazon
       73.73
28,665 1,089 22.6% 3.8%
6/30/2010
             
Best Buy
16.77
50,703 1,415 24.9% 2.8% 8/28/2010
Costco
27.97
77,946 1,303 12.8% 1.7%
8/29/2010
Dell
28.18
58,204 1,557 16.8% 2.7% 7/30/2010
Total 72.92 186,853 4,275 18.17% 2.38%
             
Amazon /
total
101.1% 15.3% 25.5% 124.5% 159.7%
Click to enlarge


Disclosure:
Short Amazon, no position in Best Buy, Dell and Costco
Stocks: AMZN, BBY, DELL, COST