<div id="readability-page-1"><div> <h2>Key Points</h2><ul><li>Investors should consider using a well-known valuation methodology to assess this stock. </li><li>It's clear that from a historical perspective, Amazon is certainly not overvalued today. </li><li>This is one of the highest-quality businesses that investors can buy and hold. </li><li>10 stocks we like better than Amazon ›</li></ul>In the past two decades, Amazon (NASDAQ: AMZN) shares have surged over 11,300% higher (as of March 6). This makes it one of the best-performing stocks this century, without a doubt. The leading e-commerce and cloud computing enterprise currently sports a huge market cap of $2.3 trillion. This is even with shares falling nearly 16% from their peak.For investors considering a purchase now, is this &#34;Magnificent Seven&#34; stock overvalued or dirt cheap? Here's the single metric that matters most when making that choice.Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an &#34;Indispensable Monopoly&#34; providing the critical technology Nvidia and Intel both need. Continue »<img src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-dXJsPWh0dHBzOi8vZy5mb29sY2RuLmNvbS9lZGl0b3JpYWwvaW1hZ2VzLzg1OTUyMi9hbWF6b24tbmFtZS1vbi15ZWxsb3ctc2NyZWVuLWZpbHRlci13aXRoLXdhcmVob3VzZS1hbmQtdHJ1Y2staW4tYmFja2dvdW5kX3RoZS1tb3RsZXktZm9vbC5wbmcmdz03MDA?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="700" height="466" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-dXJsPWh0dHBzOi8vZy5mb29sY2RuLmNvbS9lZGl0b3JpYWwvaW1hZ2VzLzg1OTUyMi9hbWF6b24tbmFtZS1vbi15ZWxsb3ctc2NyZWVuLWZpbHRlci13aXRoLXdhcmVob3VzZS1hbmQtdHJ1Y2staW4tYmFja2dvdW5kX3RoZS1tb3RsZXktZm9vbC5wbmcmdz03MDA"/>Image source: The Motley Fool. <h2>This is a popular valuation methodology</h2>In the investment world, the price-to-earnings (P/E) ratio is one of the leading ways to assess a stock's valuation. As the name suggests, it calculates a company's current stock price relative to per-share net income over the trailing 12 months. Obviously, if a business doesnt reportpositive profits, then this metric can't be used.Amazon trades at a P/E multiple of 29.7 right now. This might be viewed as an expensive setup at first. That's because the S&amp;P 500 index carries a P/E ratio of 24.8. So, Amazon trades at a premium to the overall market. But investors have to dig beneath the surface. Looking at historical data is helpful. Amazon's P/E multiple has contracted by 94% over the past decade. And during that 10-year time period, the ratio averaged 114.3. <h2>Amazon provides a favorable setup for investors</h2>Amazon collected $717 billion in net sales in 2025. And as mentioned, its market cap is massive. Plus, the business has a strong position in the various markets that it serves. Therefore, this stock is rarely ever trading at a dirt-cheap valuation. Perhaps this was the case at the end of 2022, after the share price plummeted that year.The stock also isn't overvalued, as indicated by the P/E ratio. I think investors can accurately assume that Amazon shares are still undervalued and cheap today. The shares lean more toward being a bargain opportunity than being overpriced. This should be an exciting development for prospective investors. <h2>A deal too hard to pass up</h2>This is one of the highest-quality companies out there. Amazon's robust competitive position is almost impossible to topple. It has an unrivaled scale that supports its online marketplace and logistics network, which offer consumers an exceptional value proposition with low prices and fast and free delivery.Amazon Web Services puts this company at the forefront of artificial intelligence (AI). There is strong demand for AI tools, according to CEO Andy Jassy. This provides a growth and profit engine. It's time to take advantage of the current valuation. Investors who decide to buy Amazon stock today with the intention of holding for five years are setting their portfolios up for success. <h2>Should you buy stock in Amazon right now?</h2> Before you buy stock in Amazon, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Amazon wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $522,791!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,132,678!* Now, it’s worth noting Stock Advisor’s total average return is 952% — a market-crushing outperformance compared to 191% for the S&amp;P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of March 11, 2026. Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. </div></div>

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Amazon's stock is currently trading at a P/E ratio of 29.7, higher than the S&P 500's 24.8, but historical data shows it has contracted by 94% over the past decade, averaging 114.3. Despite recent share price declines, analysts suggest Amazon is not overvalued and may be undervalued, presenting a buying opportunity for long-term investors. The company's strong market position and growth potential in AI through Amazon Web Services further support its value. However, some analysts recommend considering other stocks over Amazon at this time.

- The article discusses Amazon’s valuation, noting it is not overvalued despite a higher P/E ratio compared to the S&P 500.  
- Amazon's strong market position and significant past performance suggest it may represent a bargain opportunity for investors considering a long-term hold.  
- Additionally, while Amazon was highlighted as a quality business, the Motley Fool's analyst team recommends ten other stocks over Amazon for potential higher returns.

Is Amazon Stock Overvalued or Dirt Cheap? Here's the 1 Metric That Matters