Netflix and Amazon.com both unveiled content deals with Walt Disney on Monday, a sign of increased competition between the two companies in the video streaming business.
So, we’re wondering: How you can use Kapitall to analyse Amazon (AMZN)? To get you started, we’ve compiled a few links to Kapitall tools that will help you evaluate the company. We’ll also give some background on the financial concepts you’ll need to consider.
Check Out the Past Performance of the Stock
Past performance of a company’s stock can tell you a lot about what other investors think of its prospects. To refine the quality of your research, it’s also a good idea to compare the company’s performance against a benchmark like the S&P 500 index (used as a proxy for the rest of the stock market).
This following chart shows the performance of Amazon against the S&P 500 index over the last year. In other words, this chart shows the fluctuations of your returns if you invested on 11/01/2011.
Key Questions to Ask: Has there been a recent change in the company’s performance relative to the benchmark? Is the company’s returns very volatile, i.e. risky?
How Big is the Company Relative to Competitors?
Market cap is the public’s perception of a firm’s total value, calculated by multiplying the company’s total number of shares available for trade by the price of each share.
In general, large-cap companies (bigger market caps) tend to be less risky than small-cap companies (smaller market caps). So, if you’re worried about taking too much risk, try to focus on the bigger companies.
The Compar-O-Matic makes it easy to compare the market cap values of various companies over different periods of time. Once you start comparing the size of various companies, be sure to click on the “Play” button below the Compar-O-Matic.
Key Questions to Ask: After you press the “Play” button below, pay attention to the fluctuations of a company’s market cap over time. Is the company’s value fluctuating more than the competition? If it is, it may be a signal that the company is a riskier investment.
Evaluate the Stock’s Recent Momentum
By comparing short-term returns to longer-term returns, you’ll be able to develop an understanding of the recent momentum behind Amazon stock prices.
Kapitall’s Compar-O-Matic can be used to chart a 2-dimensional data set of performance data. On the horizontal axis we’ve listed monthly returns, and on the vertical axis we’ve listed annual returns.
Where a certain stock is placed can tell you a lot about its recent performance. (Hover your mouse over the company item to identify the companies)
1. If the stocks is in the top left quadrant: Weak monthly performance after relatively strong annual performance (i.e. losing momentum)
2. If the stock is in the top right quadrant: Strong monthly performance on top of relatively strong annual performance (i.e. bullish momentum)
3. If the stock is in the bottom left quadrant: Weak monthly performance, in addition to weak annual performance (i.e. bearish momentum)
4. If the stock is in the bottom right quadrant: Relatively strong monthly performance, combined with relatively weak annual performance (i.e. recovering momentum)
Key Questions to Ask: Is the stock gaining or losing momentum? Can you find any reason for the current trend to reverse?