When it comes to profitability, Apple generally makes more money as a business than Amazon. While both companies are financial titans, the term "making more money" in a corporate context often refers to net profit or overall profitability, rather than just total revenue.
Apple's Profitability Lead
Apple is recognized as a more profitable business, consistently demonstrating superior profit margins and generating substantial net income. This indicates that Apple is highly efficient at converting its sales into actual profit, which is crucial for a company's financial health and long-term value. Apple's strong brand loyalty, premium pricing strategy, and high-margin services contribute significantly to its profitability.
Key Financial Aspects
It's important to distinguish between a company's total revenue (top-line sales) and its net profit (bottom-line earnings).
- Revenue: Amazon, with its vast e-commerce empire and rapidly growing cloud services (Amazon Web Services or AWS), often reports higher gross revenues.
- Net Profit: Despite Amazon's expansive reach and high revenue, Apple typically retains a larger portion of its revenue as profit. This means Apple effectively manages its costs and operates with greater financial efficiency, leading to higher net income.
Valuation Comparison
Beyond raw profit figures, investors often look at how efficiently a company generates earnings relative to its market valuation. Apple also tends to trade at a more attractive valuation compared to Amazon, especially when considering its profitability. This suggests that investors can acquire a share of Apple's earnings or free cash flow at a lower cost per unit of earnings than they can with Amazon.
Here's a comparison of key valuation metrics:
| Metric | Apple (AAPL) | Amazon (AMZN) |
|---|---|---|
| Forward Price-to-Earnings (P/E) | 28 | 57 |
| Price-to-Free Cash Flow (P/FCF) | 26 | N/A |
- Forward Price-to-Earnings (P/E): This ratio compares a company's current share price to its estimated future earnings per share. A lower P/E ratio can indicate a more "cheaper" or undervalued stock relative to its earnings potential. Apple's P/E of 28 is significantly lower than Amazon's 57, suggesting it trades at a more favorable valuation for its expected earnings.
- Price-to-Free Cash Flow (P/FCF): This metric relates a company's market capitalization to its free cash flow, which is the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. Apple trades at a P/FCF multiple of 26, indicating it is also a cheaper stock based on its ability to generate cash.
In summary, while Amazon might sometimes report higher overall revenues due to its business model, Apple consistently proves to be the more profitable entity by generating higher net income and is often considered a more valuable investment based on common financial valuation metrics.
