In this post, we will compare Amazon and Walmart revenues, net profits, and net profit margins for the years 1995 to 2014. This will help us see how the two companies have grown over the past 20 years. On July 24, 2015, Amazon crossed Walmart to become the biggest retailer by market value. Is the Amazon valuation justified?
Amazon Revenues, Net Profits, and Net Profit Margins - 1995 to 2014
Amazon generated $511 thousand of revenues during 1995 and had a net loss of $303 thousand. During 2014, Amazon generated $89 billion of revenues and had a net loss of $241 million. Net profit margins were very negative during first 7-8 years. Then, they turned positive. Net profits margins have been nearly flat for the last 3 years.
Walmart Revenues, Net Profits, and Net Profit Margins - 1995 to 2014
Walmart generated $89 billion of revenues during 1995 and had a net profit of $2.7 billion. During 2014, Walmart generated $486 billion of revenues and had a net profit of $16.2 billion. Net profit margins for Walmart have remained consistent. They have been in the range of 3.1-3.6% for the last 20 years.
Amazon vs Walmart - Revenues and Profits Compared
During the last 20 years, from 1995 to 2014, Amazon has generated a combined revenues of $409 billion. This means that if we add Amazon revenues for all the years from 1995 to 2014, the total would be $409 billion. In contrast, Walmart generated $486 billion in 2014 alone.
During the last 20 years, from 1995 to 2014, Amazon has generated a combined net profit of $1.96 billion. This means that if we add Amazon net profits and losses for all the years from 1995 to 2014, the total would be $1.96 billion. In contrast, Walmart generated $16.18 billion in 2014 alone. So, Walmart generated eight-times more net profit in 2014 than what Amazon could generate during the last 20 years.
Amazon vs Walmart - Market Cap - July 24, 2015
Amazon stock surged after its Q2'15 earnings announcement on July 23, 2015. On July 24, 2015, Amazon crossed Walmart to become the biggest retailer by market value. Amazon market cap was $246.54 billion, whereas, Walmart market cap was $230.53 billion.
Why do investors value Amazon more than Walmart? This is somewhat difficult to understand because the business fundamentals analysis favors Walmart. Amazon revenues are one-fifth of that of Walmart. Amazon revenues in 2014 nearly equal that of Walmart in 1995. Amazon still had net losses in 2014. Amazon can not come even closer to Walmart in revenues or profits over the next five to ten years. Amazon revenue growth may be higher than Walmart. But, that is of a much smaller base. The revenue growth will begin to slow down now. The revenue growth is failing to translate into net profit growth. You can not expect much profits from Amazon over next five to ten years. On a contrary, Walmart has consistently delivered net profit margin of over 3% for last 20 years. There seems less uncertainty with Walmart profits than Amazon.
Amazon Vs Walmart - Presentation over SlideShare