Amazon & FBA businesses EBITDA ratios

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by a professional
in Brooklyn, NY, USA

1yr ago

Amazon & FBA businesses EBITDA ratios

Looking at FBA & Amazon businesses' EBITDA ratios I couldn't help but notice that higher margin shops have lower ask prices relative to their EBITDA:

redacted

Why is that? Intuitively, higher-margin businesses should be more valuable and have higher ask price per EBITDA dollar.

The likely explanation is tied to business stability: it becomes clear that many higher-margin businesses are newly established, which naturally introduces uncertainty about whether those margins can be maintained in the future.

redacted

We used the data from redacted to power this analysis.

Curious to hear other bits of financial wisdom you came across in your search!

1 Like

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reply by a searcher 11mos ago
from INSEAD in Boston, Massachusetts, EE. UU.

^redacted‌ , thanks for sharing this analysis. This is very interesting. The high margin-low price relationship could also be associated with a leaner company structure, where the founder or a few employees perform multiple tasks and roles in parallel. With the increase of structure, the risk reduces, but the EBITDA margin shrinks.

reply by a searcher 8mos ago
from Texas A&M University in Dallas, TX, USA

There are pump & dump founders/brands from aggregators that use cash accounting methods to inflate their fiscal year EBITDA (or TTM COGS engineering) to attract quick sale buyers. You're also right about stability over time. 7 years ago basically every brand was a "me too" brand where they would slap a label on any Alibaba product. When there's quick money in a niche, it gets eroded over time by mostly gray/black hat Chinese sellers willing to operate at 6% net margins. It makes sense to compete in some niches due to the volume, but in most it doesn't.