In the past, Amazon (AMZN -2.33%) has undoubtedly made for one of the best investments ever. Shares have soared 660% in the past decade and 6,110% in the past 20 years, outpacing the Nasdaq Composite index by a wide margin. Investors might hope that the same will happen in the future.

Because of Amazon's gargantuan market cap of $1.6 trillion and popular products and services, investors might think they are already familiar with the business. But it's worth taking time to understand some key information.

If you're interested in buying this FAANG stock, here are four things you need to know.

1. Online shopping matters

Amazon might be considered a tech behemoth, but the company is still dependent on e-commerce sales for a lot of its success. In the last quarter (Q3 2023, ended Sept. 30), online stores and third-party seller services brought in $57 billion and $34 billion of revenue, respectively, representing 64% of Amazon's total in the period.

According to Statista, 38% of all online shopping in the U.S. takes place on Amazon.com. And the site had a whopping 4.7 billion visitors in November. This demonstrates the sheer dominance Amazon has in the industry.

2. Booming segments

Investors have likely heard of Amazon Web Services (AWS), the company's leading cloud computing division that commands roughly a third of the industry's market share. Revenue gains have slowed a bit in recent quarters as clients have pulled back spending due to macro uncertainty.

But AWS has historically been a major growth engine for the company, which should continue in the decade ahead as the cloud market is still in the early stages. AWS also produces the bulk of operating income for the business.

A lesser-known area where Amazon is seeing tremendous success is in digital advertising. Because the website garners so much web traffic, it only made sense that the management team started selling ads. This segment experienced greater than 20% year-over-year revenue growth in each of the last six quarters. And it's only behind Alphabet and Meta Platforms in terms of market share.

3. Where are the profits?

Amazon is a unique company because even though it's achieved such monumental success and scale, its profits have been tiny. In the last nine months, the business generated $24 billion of operating income, compared to $405 billion of net revenue. That's good for a 6% margin, nothing to write home about.

But this doesn't mean Amazon is a poor business from a financial perspective. Not at all. Instead, the key to the story is that the management team, from founder Jeff Bezos to current CEO Andy Jassy, has always prioritized continuously reinvesting cash back into the business to achieve greater growth.

This includes things like warehouses and data centers. Amazon plans to spend $50 billion on these investments just this year.

Based on the success of some of the segments that I previously discussed, Amazon still has sizable growth potential, which is impressive given its already massive size. If the business were to start reporting strong profit gains, investors might view it as a red flag. It would be an indication that opportunities to expand are limited.

There have been improvements more recently, however. Cost cuts have helped boost Amazon's operating profit to $11.2 billion last quarter, up from $2.5 billion in the year-ago period.

4. A reasonable valuation

The last thing you'll want to know about if you're thinking of adding Amazon to your portfolio is the valuation. As of this writing, shares are 18% below their peak price, and they trade at a price-to-sales ratio of 2.9. That's below the trailing three-, five-, and 10-year averages.

Despite its huge run in 2023, now still looks like a good time to scoop up the stock.