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Amazon's Stock Is Expensive Compared With Apple: Greenberg

No argument on Wall Street can get you more trouble than trying to make the case one company is cheap or expensive relative to another.

Amazon.com
Amazon.com

But when you pit Amazon (the expensive one) against Apple (the cheap one), you can’t help but notice the difference.

And it’s a comparison that shouldn’t completely be ignored given that a) both are retailers b) both are manufacturers c) both are leaders in their space that executed against all odds, and d) Amazon is spending serious money trying to steal customers from Apple.

The story is in the chart below.

Apple vs. Amazon

Apple
Amazon
Trailing P/E 14.37 100.20
Forward P/E 10.30 71.43
Price/Book 4.82 13.28
Profit Margin 23.95% 2.58%
Operating Margin 31.22% 3.14%
Return on Assets 22.05% 5.21%
Return on Equity 41.67% 15.24%
Revenue $108.25B $40.28B
Total Cash $25.95B $6.36B
Levered Free Cash Flow $19.75B $1.03B
Source: Yahoo Finance

Among the most profoundly out-of-whack stats: Forward price/earnings multiple (which can also be the most misleading), margins and cash, not to mention return on capital and return on equity.

“Look out five years,” said one money manger I respect. “My guess is that Amazon is a lot bigger, at least double the size in five years. I doubt Apple doubles in that time.”

To which I responded: “Who knows what will happen five years out. Apple will likely slow and Amazon would appear to have a long runway, but margins, returns and all of the stuff that people don’t care about is just so puny at Amazon relative to Apple.”

He: “Agree.”

My take: Amazon gets credit for not playing the beat-the-street game and investing for the future. But if it doesn’t pay off soon those other metrics will start to matter.

Questions? Comments? Write to HerbOnTheStreet@cnbc.com

Follow Herb on Twitter: @herbgreenberg and on Google+

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Disclaimer

  • Patti Domm

    Patti Domm is CNBC Executive Editor, News, responsible for news coverage of the markets and economy.

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

  • CNBC Personal Finance Correspondent

  • JeeYeon Park is a writer for CNBC.com. Follow her on Twitter: @JeeYeonParkCNBC

  • Rick Santelli joined CNBC Business News as an on-air editor in 1999, reporting live from the floor of the Chicago Board of Trade.

  • Senior Producer at CNBC's Breaking News Desk.