Amazon.com, Inc. (AMZN), Barnes & Noble, Inc. (BKS): You Can’t Buy This

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You Can’t Buy This
For investors buying into all of the above five delusions, they are paying over 330 times projected earnings for this full year. For a company that analysts expect to grow earnings by about 36% in the next few years, this is a steep price to pay.

Given the choice between buying Barnes & Noble with negative expected earnings and negative EPS growth, I guess the Amazon.com, Inc. (NASDAQ:AMZN) story sounds OK. Considering that investors can buy Best Buy Co., Inc. (NYSE:BBY) for about 14 times projected earnings, and get a 2.2% yield and expected EPS growth of 6.7%, it might be tough for growth investors to ignore Amazon.

However, when you realize that eBay Inc (NASDAQ:EBAY) is enabling almost as much commerce as Amazon.com, Inc. (NASDAQ:AMZN), yet sells for a forward P/E of just over 19, the case for Amazon falls apart. eBay reported double digit growth in users at both PayPal and its Marketplaces businesses. The company has a much higher operating margin than Amazon, and generates substantial free cash flow (over $650 million last quarter). Given these numbers from eBay, buying Amazon at these levels just seems like a bad call.

The article Investors Are Suffering From 4 Delusions With This Stock originally appeared on Fool.com.

Chad Henage has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and eBay. The Motley Fool owns shares of Amazon.com and eBay. 

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