Question

ADM 1 Continuing Company Analysis-Amazon and Walmart: Earnings per share Amazon.com, Inc. is one of the largest Internet retailers in the world. Walmart is the largest retailer in the United States. Amazon and Walmart compete in similar REAL WORLD markets; however, Walmart sells through both traditional retail stores and the Internet, while Amazon sells only through the Internet. Earnings and common stock outstanding information was obtained from recent financial statements for both companies as follows (in millions): Amazon Walmart Net income (loss) Average number of common shares outstanding $(241) 462 $16,363 3,230 A. Determine the earnings per share for each company. Neither company had preferred stock outstanding. (Round to the nearest cent.) B. Which company appears more profitable from an earnings-per-share perspective? The market price of Amazon common stock was $437 per share at a time when Walmart's was $72 per share. How would you explain this difference in market price given the earnings per share computed in (A) for both companies?

Answer 1

ANSWER

Part A: Amazone Walmart Net income /Average number of common shares outstanding EPS 16363 -241 462 3230 5.07 0.52 Part B: Walmart as it has higher EPS. Part C: Market prices are also based on the future growth prospects of the company.

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