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Amazon and Barnes and Noble In the decision of investing in Amazon or Barnes and Noble I recommend neither Looking at the present state of both companies neither displays good strong expectations of profits Instead I see both companies with low projected earnings growth ratios and negative cash flow Projected earnings growth rate also known as the PEG ratio is a widely used indicator of a stocks potential value By some PEG ratio is favored over the price earnings ratio because it accounts for growth The PEG ratio is determined by the price earnings ratio divided by the its projected earnings growth rate For Amazon their PEG ratio is 274 -057 48 using next years growth rate For Barnes and Noble their PEG ratio is 067 -023 296 using next years growth rate The lower PEG ratio in this case Barnes and Noble means that the companys stock is undervalued Analysts will usually recommend undervalued stock Cash flow is the amount of cash a company generates and uses during a period Cash flow can be used as an indication of a companys financial strength To find the cash flow used during a companys operations we must look at the companys net cash flow gainloss from operations This will tell us if indeed the company has cash flow Amazon has 1 billion in cash but its net cash flow loss from operations is a negative number - 90875 This indicates that Amazon has zero cash flow and must be liquidating its assets in order to source this amount of cash used in the companys operations Barnes and Noble has approximately 1 billion in cash and its net cash flow loss from operations is a negative number - 58443 This indicates that Barnes and Noble also has zero cash flow and must be liquidating its assets in order to source this amount of cash In conclusion with the knowledge of the
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