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  1. Amazon.com,inc Nick Romjue

  2. overview • Disaggregate Return on Net Enterprise Assets • Enterprise profit margin • Enterprise asset turnover • Parsimonious Forecast • Industry Analysis • Free Cash Flow Valuation

  3. The Catalog & mail order house industry Comparable companies

  4. Amazon return on net enterprise assets

  5. Breaking apart rnea

  6. Sales growth Assume: 25%

  7. Epm (from sales) Assume: 1%

  8. eato Assume: 50

  9. Parsimonious assumptions • Sales growth rate: 25.00% • Enterprise profit margin: 1.00% • Enterprise asset turnover: 50

  10. Parsimonious forecast

  11. Industry analysis • The comparable companies were not helpful in this analysis • Outside of comparing sales growth to eBay, none of them had financial figures similar to Amazon • These companies may be in the same industry, but they are at different life cycle stages and are each managed differently

  12. Free cash flow FCF = EPAT – Increase in NEA

  13. Present value of fcf

  14. Present value of fcf with continuing value

  15. Questions?

  16. Sources • Amazon.comInc 10K for fiscal years 2010-2013