Consumers are becoming more and more socially conscious, and they want the goods and services they use to measure up. In truth, it doesn't take much. A simple action that costs a company very little or nothing at all can make a real difference for the consumer and, from there, the bottom line.
Amazon.com (Nasdaq: AMZN ) has just announced a new employee development program that looks to be groundbreaking in its approach. Let's dive deep into the Web-retailing giant, evaluate that new program, and take a look at the numbers. We'll analyze Amazon in terms of its performance as a socially conscious enterprise, as a business, and as an investment.
The Amazon Career Choice Program
"At Amazon, we like to pioneer, we like to invent, and we're not willing to do things the normal way if we can figure out a better way."
That quote is from Amazon CEO Jeff Bezos, and nicely sums up his vision of how he runs his company from a purely business perspective, and how he runs it from a social-responsibility perspective. Bezos would probably say the two are inseparable, which his brand-new employee development program, the Amazon Career Choice Program, bears out well.
The Amazon Career Choice Program is an innovative program that gives all full-time Amazon employees with a tenure of at least three years the chance to pursue job training at the company's expense, up to $2,000 per year for four years. To the company's credit, the field doesn't even have to be related to the job the employee is currently performing, or even anything the company could potentially offer a job to said employee in.
But the job does have to be in a field that's in demand and high-paying, per the U.S. Bureau of Labor statistics or other like agencies. Fields that are covered include engineering, IT, mechanical and electrical trades, health care, construction, transportation, and accounting. Amazon gives a few more specific examples on its site, including fields such as:
- Machine-tool technology
- Dental hygiene
- Computer-aided design
- Aircraft mechanics
Also unusual to the program, and highly beneficial to participating employees, Amazon will pay the cost of the courses upfront, rather than the more typical post-course reimbursement process. Companies that are willing to go the distance for their employees are hoping those employees will in return go the distance for them. It's a reasonable assumption, and one the economy overall could stand to see more of.
In Bezos we trust
Now, let's look at a few basic but telling metrics and see how Amazon measures up as a business and as an investment.
Revenue growth: Amazon grew its year-over-year quarterly revenue by a big 34%, although it reports Q2 earnings after tomorrow's market close. Tablet-computing and digital-media-delivery peer Apple (Nasdaq: AAPL ) grew it's YOY quarterly revenue by 23%. There are few if any companies in the world keeping up with Apple these days, and Amazon's 34% growth is phenomenal by any measure.
Alternatively, slowly disappearing Barnes & Noble (NYSE: BKS ) didn't grow its revenue at all last quarter. Brick-and-mortar rivals Wal-Mart (NYSE: WMT ) and Target (NYSE: TGT ) grew theirs by a solid 9% and decent 6%, respectively.
Earnings growth: Apple, as usual, posted strong gains as well in this department, with YOY earnings growth of 21%. At 10.1%, Wal-Mart's earnings growth was very respectable. Target's, at 1.2%, was not. And YOY earnings growth for Amazon fell by a whopping 35.3%. Why the drop off the cliff?
It's widely understood that Amazon operates with razor-thin margins on most of its products, including Kindles, which may actually be selling at or below cost. Bezos says he's looking ahead, trying to capture as much market share as possible now to get people hooked into the Amazon media-and-shopping empire.
It's a reasonable strategy, and one I think is bearing out, but it means investors can't get quarter-to-quarter tunnel vision when evaluating the company. They have to have a long-term outlook.
Cash-to-debt ratio: It's always good to see more cash than debt on the balance sheet, ideally at least 1.5 times more.
- With $5.72 billion in cash and zero debt, Amazon's C/D is as good as it gets.
- At least until you get to Apple, which has $27.64 billion in cash and zero debt.
- With $54.13 million in cash and $474.2 million in debt, B&N's C/D is an unenviable 0.11.
- $8.13 billion in cash and $54.82 billion in debt give Wal-Mart the slightly better C/D of 0.14.
- Target's $690 million in cash and $17.52 billion in debt leave a lot to be desired, and a C/D 0.04.
Price-to-earnings ratio: With a P/E of 186, Amazon isn't cheap, and you're paying now for a lot of (hopefully) future earnings; this is another case where you need "trust in Bezos" to buy into Amazon. Conversely, Apple trades with the strangely low P/E of just 14. Wal-Mart and Target are also reasonably priced, with P/Es of 15 and 14, respectively. (Since B&N currently has no earnings, technically it has no P/E.)
Amazon: making money and making a difference
Companies that understand the connection between profit and social responsibility are companies that are in touch with the times and are some of the planet's most successful. Excepting the company's earnings shortfall this past quarter, Amazon is in excellent shape from a business perspective and is unarguably successful, and its new Career Choice Program is sure sign that the company gets the connection between doing good for society and performing well as a business.
Are any companies perfect in this regard? No, but, to paraphrase Voltaire, it's important to never let the quest for the perfect drive out the good. If you're looking for similarly forward-thinking, profitable investments like Amazon, you can check out the Fool's brand new premium research report on both the upside and downside cases for Apple, which, after yesterday's disappointing earnings release is more imperative than ever that investors understand. You can grab your copy today.