Amazon.com Inc. (AMZN)

Enterprise Value to EBITDA (EV/EBITDA)

Difficulty: Intermediate

Amazon.com Inc., EBITDA calculation

USD $ in millions

12 months ended	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Net income (loss)	3,033	2,371	596	(241)	274
Add: Income tax expense	769	1,425	950	167	161
Earnings before tax (EBT)	3,802	3,796	1,546	(74)	435
Add: Interest expense	848	484	459	210	141
Earnings before interest and tax (EBIT)	4,650	4,280	2,005	136	576
Add: Depreciation of property and equipment, including internal-use software and website development, and other amortization, including capitalized content costs	11,478	8,116	6,281	4,746	3,253
Earnings before interest, tax, depreciation and amortization (EBITDA)	16,128	12,396	8,286	4,882	3,829

Item	Description	The company
EBITDA	To calculate EBITDA analysts start with net earnings. To that earnings number, interest, taxes, depreciation, and amortization are added. EBITDA as a pre-interest number is a flow to all providers of capital.	Amazon.com Inc.'s EBITDA increased from 2015 to 2016 and from 2016 to 2017.

Amazon.com Inc., current EV/EBITDA calculation, comparison to benchmarks

Selected Financial Data (USD $ in millions)
Enterprise value (EV)	885,540
Earnings before interest, tax, depreciation and amortization (EBITDA)	16,128
Ratio
EV/EBITDA	54.91
Benchmarks
EV/EBITDA, Competitors
Costco Wholesale Corp.	18.17
eBay Inc.	10.96
Home Depot Inc.	14.49
Lowe's Cos. Inc.	13.23
Netflix Inc.	21.48
Target Corp.	7.91
TJX Cos. Inc.	14.40
Walmart Inc.	11.45
EV/EBITDA, Sector
General Retailers	19.66
EV/EBITDA, Industry
Consumer Services	14.72

If company EV/EBITDA is lower then the EV/EBITDA of benchmark then company is relatively undervalued.

Otherwise, if company EV/EBITDA is higher then the EV/EBITDA of benchmark then company is relatively overvalued.

Amazon.com Inc., historical EV/EBITDA calculation, comparison to benchmarks

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Selected Financial Data (USD $ in millions)
Enterprise value (EV)¹	705,410	389,269	274,123	163,311	159,204
Earnings before interest, tax, depreciation and amortization (EBITDA)²	16,128	12,396	8,286	4,882	3,829
Ratio
EV/EBITDA³	43.74	31.40	33.08	33.45	41.58
Benchmarks
EV/EBITDA, Competitors
Costco Wholesale Corp.	12.63	13.27	13.49	12.08	12.30
eBay Inc.	14.50	8.04	8.92	12.34	12.88
Home Depot Inc.	12.90	13.23	12.90	11.11	11.74
Lowe's Cos. Inc.	11.43	12.18	12.79	10.47	9.60
Netflix Inc.	18.03	11.80	10.59	8.22	9.62
Target Corp.	5.59	7.47	9.21	7.85	8.09
TJX Cos. Inc.	11.16	11.83	11.14	10.70	9.10
Walmart Inc.	7.91	7.75	8.40	8.37	8.16
EV/EBITDA, Sector
General Retailers	15.92	12.72	12.34	10.93	10.95
EV/EBITDA, Industry
Consumer Services	13.17	11.89	11.41	11.20	10.78

2017 Calculations

³ EV/EBITDA = EV ÷ EBITDA
= 705,410 ÷ 16,128 = 43.74

Ratio	Description	The company
EV/EBITDA	EV/EBITDA is a valuation indicator for the overall company rather than common stock.	Amazon.com Inc.'s EV/EBITDA ratio declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.