Is Amazon Investing Too Much in Growth?
Amazon (NASDAQ: AMZN) is a leader in the two enormous growth markets of e-commerce and cloud computing, and that's helped the company's market value and earnings soar over the years. But to stay ahead in these competitive fields, Amazon has spent a bundle. In fact, just last year, the company increased its research and development (R&D) investment by 30% to more than $73 billion.
This information, on its own, shouldn't prompt us to run out and buy Amazon shares though. It's important to take a closer look at Amazon's financial situation to determine whether the company truly is making the right choices and benefiting from its investments -- and whether its growth strategy is sustainable.
And here, two key measures -- return on invested capital (ROIC) and weighted average cost of capital (WACC) -- may look worrisome at the moment. So, it's time to ask this question: Is Amazon investing too much in growth? Let's find out.
Source Fool.com
