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Since its founding in 1994, Amazon has steadily grown and clawed its way to the top of the retail heap.
Although the Seattle-based tech giant has had its ups and downs since the height of the coronavirus pandemic, it has badly lagged the market this year.
While far from cheap, two key valuation measures show that Amazon is currently trading at levels not seen in at least 10 years.
With the price of seemingly everything on the rise this year, the chance to score an actual deal on something is a real treat. Add in the fact that my top retail pick is not some no-name brand coming out of the damaged or defective bin and you have yourself an absolute steal.
I think it's a great time to put $1,000 into shares of Amazon (NASDAQ: AMZN).
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With its $2.3 trillion market cap, Amazon is already the most valuable of the 77 members of the SPDR S&P Retail ETF (NYSEMKT: XRT), weighing in at almost three times the size of second-ranked Walmart.
Despite its size and roughly 40% share of total U.S. e-commerce sales, Amazon's 1.3% year-to-date gain is well behind the 8% advance posted by the SPDR S&P Retail ETF and the nearly 15% increase by the S&P 500 index through Oct. 20.
Over the past month, economic concerns, tariff worries, and general geopolitical jitters have been happening as Amazon's stock slipped by almost 4%.
Beyond the fact that 66 of 68 analysts who cover Amazon currently rate it a buy or strong buy with an average 12-month price target of $266 -- which is about 20% above current levels -- the Seattle-based retail giant is in almost unprecedented valuation space right now by two key measures.
Image source: Amazon.
Amazon's forward P/E ratio is 34 times expected earnings over the next 12 months. While that's still about 50% higher than the S&P 500's equivalent ratio, it's actually the cheapest that Amazon has been by that measure in a decade.
Said another way, since 2015, Amazon's forward P/E ratio has been higher than it is right now 99% of the time.
Another bellwether valuation is also in historic territory. Specifically, Amazon's gross profit margin of 49.6% delivered over the past 12 months lands it in the 100th percentile, meaning at no time in the past 10 years has Amazon been more profitable.
In short, long-term investors who've waited for a good entry point to own the digital retailing giant should look no further, and also feel comfortable that they're getting a fair price.
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Matthew Nesto has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Walmart. The Motley Fool has a disclosure policy.
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