Two Perspectives on Amazon's Intrinsic Value: Discounted Cash Flow vs. Discounted EVA Analysis

Abstract

We present an advanced case study in financial analysis and intrinsic value modeling focused on Amazon, Inc. Part one of the case provides students with the opportunity to assess Amazon's financial strength and intrinsic value using conventional metrics, including profit margins, relative valuation, and a discounted free cash flow model. Part two of the case extends the analysis by requiring students to interpret a detailed Economic Value-Added (EVA) model provided by EVA Dimensions, LLC. The goal of the case is to extend students' understanding of financial analysis and valuation modeling by requiring them to interpret a variety of new metrics, including EVA margin, EVA momentum, and the estimation of a stock's intrinsic value using a discounted EVA approach. The level of this case is suitable for advanced undergraduate finance majors and MBAs. The case is structured to accommodate a variety of pedagogical approaches, including the opportunity for students to assume the role of the analysts in the case narrative and present and/or debate their findings and conclusions in a live classroom setting. A detailed answer key is available for adopting instructors.