Amazon.com, Inc. (AMZN)vs BABA Holdings, Inc. (BABA)

Quick verdict

Amazon.com, Inc. (AMZN) and BABA Holdings, Inc. (BABA) appeal to different investors. On our six-factor framework, AMZN scores 1 and BABA scores 5. BABA looks cheaper on the multiples that matter, while AMZN grows faster and BABA earns higher returns on capital. Overall, BABA edges this comparison, but the right pick depends on whether you prioritise value, growth, income or balance-sheet safety.

2-year relative performance

At-a-glance comparison

Business model and revenue mix

Amazon.com, Inc. operates in Internet Retail (Consumer Cyclical), while BABA Holdings, Inc. sits in Oil & Gas Integrated (Energy). The two operate in different sectors, so cyclicality and end-market exposure differ — factor that into any portfolio overlap. AMZN carries a beta of 1.53 versus 1.84 for BABA, meaning BABA has historically been the more volatile of the two.

Valuation

On valuation, BABA is the cheaper stock. AMZN trades on a forward P/E of 45.95 and EV/EBITDA of 32.34, against 22.12 and 21.41 for BABA. Price-to-sales is 20.74 vs 13.99, and free-cash-flow yield is 2.0% vs 3.3%. A higher multiple is only justified if the company can sustain faster growth or wider margins, which is exactly what the next sections test.

Growth profile

AMZN is the faster grower. AMZN has compounded revenue at 16.9% over three years with EPS growth of 25.7%, while BABA has delivered 5.1% revenue and 8.1% EPS growth. Growth like this is the single biggest driver of long-term returns, but it also tends to come with a richer valuation, so it must be weighed against the multiples above.

Profitability and quality

On profitability and quality, BABA is stronger. AMZN posts a 45.9% operating margin, 26.3% return on equity and 17.3% return on invested capital. BABA posts 41.7%, 23.1% and 22.4% respectively. Return on invested capital above roughly 15% is a hallmark of a durable competitive advantage, so this metric deserves particular attention.

Balance-sheet risk

BABA has the safer balance sheet. AMZN carries net-debt/EBITDA of 0.86x with a current ratio of 1.04, versus -2.45x and 2.91 for BABA. Lower leverage gives a company more room to invest through a downturn and reduces the risk of dilution or distress.

Price performance and shareholder returns

Over the past year AMZN returned 4.0% against 114.9% for BABA; on a three-year annualised basis it is 42.8% vs 41.6%. AMZN yields 0.0% and BABA yields 2.3%. Past performance never guarantees future results, but the multi-year track record shows how the market has rewarded each business so far.

Which stock fits which investor

For value-oriented investors, BABA is the better fit on today's multiples. Growth investors will likely prefer AMZN, which is expanding faster. Income investors should lean toward BABA for its higher shareholder yield, while investors who prize quality-at-a-reasonable-price will favour BABA for its superior returns on capital. This is a comparison of facts, not a recommendation — your time horizon, risk tolerance and existing holdings should drive the final decision.

• Value: BABA
• Growth: AMZN
• Income: BABA
• Quality: BABA

Frequently asked questions

Is AMZN or BABA the better buy right now?

Neither is universally "better." AMZN scores 1 and BABA scores 5 on our six-factor framework. BABA is cheaper, AMZN grows faster, and BABA is higher quality — so the right pick depends on your objective.

Which stock is cheaper, AMZN or BABA?

BABA is the cheaper stock across forward P/E (45.95 vs 22.12), EV/EBITDA (32.34 vs 21.41) and price-to-sales (20.74 vs 13.99).

Which has grown faster, AMZN or BABA?

AMZN has the stronger growth profile, with three-year revenue CAGR of 16.9% for AMZN versus 5.1% for BABA.

Which stock pays a bigger dividend?

AMZN yields 0.0% and BABA yields 2.3%, so BABA is the stronger income choice.

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