Compare and contrast Amazon to Wallmart. Use the following metrics: 1) P/E \"Pri

Question

Compare and contrast Amazon to Wallmart. Use the following metrics:

1) P/E "Price-Earnings", P/S "Price-Sales", and Market Value to Book Value.

2) Expound on their strategy. Ascertain that you include the move of WMT "Wal-Mart Stores, Inc." to become a stronger force on the online space. Will people still shop in person? That is a critical question. Which firm would you buy and why? The "why" gets all the points. It is possible you would buy neither, or both.

*The financials are based on the companies latest numbers and statements* HINT: Use Yahoo Finance.

Please help with the problem!

Explanation / Answer

1. Amazon:

P/E ratio = 304.13 (trailing twelve months), P/S ratio = 3.644 (trailing twelve months), Market value to book value = 23.38

2. Walmart:

P/E/ ratio = 23.21 (trailing twelve months), P/S ratio = 0.5924 (trailing twelve months), Market value to book value = 3.790

2. Amazon’s strategy is to grow at breakneck speed and focus on concentric diversification. The company follows a cost leadership strategy and aims to maximize the value that its customers will derive when they buy using Amazon’s portal.

Wal-Mart also follows a cost leadership strategy like Amazon but is more of a brick and mortar player. It also follows a differentiation strategy to offer unique products to buyers.

Now, with regards to the question that will people still buy in person my answer is ‘yes’. In the past Wal-Mart has remain unaffected by Amazon’s price cuts and continues to hold its fort due to its advantages of scale and physical presence.

The firm that I would buy is Wal-Mart. This is because valuations of Wal-Mart (as indicated by the numbers above) are reasonable and hence one can see reasonable upsides in case of Wal-Mart’s stock. Amazon has a rich valuation and buying the stock could be riskier when compared to Wal-Mart.

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