The Inc (AMZN) DCF Valuation: Is The Stock Undervalued?

Johnny HopkinsStock ScreenerLeave a Comment

As part of a new series, each week we typically conduct a DCF on one of the companies in our screens. This week we thought we’d take a look at one of the stocks that are not currently in our screens, Inc (AMZN).


Amazon is a leading online retailer and one of the highest-grossing e-commerce aggregators, with $386 billion in net sales and approximately $578 billion in estimated physical/digital online gross merchandise volume in 2021. Retail-related revenue represents approximately 80% of the total, followed by Amazon Web Services’ cloud computing, storage, database, and other offerings (10%-15%), advertising services (5%), and other. International segments constitute 25%-30% of Amazon’s non-AWS sales, led by Germany, the United Kingdom, and Japan.

Recent Performance

Over the past twelve months the share price is up 66.39%.

AMZN Chart

AMZN< data by YCharts


  • Discount Rate: 8.90%
  • Terminal Growth Rate: 2%
  • WACC: 8.90%

Forecasted Free Cash Flows (FCFs)

Year FCF (billions) PV(billions)
2024 24 22.04
2025 29 24.45
2026 35 27.10
2027 42 29.86
2028 50 32.65

Terminal Value

Terminal Value = FCF * (1 + g) / (r – g) = 739.13 billion

Present Value of Terminal Value

PV of Terminal Value = Terminal Value / (1 + WACC)^5 = 482.59 billion

Present Value of Free Cash Flows

Present Value of FCFs = ∑ (FCF / (1 + r)^n) = 136.10 billion

Enterprise Value

Enterprise Value = Present Value of FCFs + Present Value of Terminal Value = 618.70 billion

Net Debt

Net Debt = Total Debt – Total Cash = 13.26 billion

Equity Value

Equity Value = Enterprise Value – Net Debt = 605.44 billion

Per-Share DCF Value

Per-Share DCF Value = Enterprise Value / Number of Shares Outstanding = $58.67


DCF Value Current Price Margin of Safety
$58.67 $146.84 -150.30%

Based on the DCF valuation, the stock is overvalued. The DCF value of $58.67 per share is lower than the current market price of $146.84. The Margin of Safety is -150.30%.

It is important to note that this valuation is based on a number of assumptions, and these assumptions could change in the future. This valuation is meant to be a back-of-the-envelope analyse that could be used as a starting point in a much more thorough valuation process. As a result, it is important to do your own research before making any investment decision.

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