Fundamental Analysis

About Netflix

Netflix has been leading the way for digital content since 1997

Netflix is the world’s leading internet entertainment service with 125 million memberships in over 190 countries enjoying TV series, documentaries and feature films across a wide variety of genres and languages. Members can watch as much as they want, anytime, anywhere, on any internet-connected screen. Members can play, pause and resume watching, all without commercials or commitments.

unnamed (1)

High level decisions on buy or sell for a stock should be driven by

1. The margin that the company makes. i.e. Out of $1 that the company sells how much does the company taken home.

    • Here we see NETFLIX makes a margin of 12% on Gross Level and about 8% on Net level This means that out of $1 that it makes $0.08 is being pocketed as profits.

2. The growth rates of the company on revenue, net income, EPS and Dividend. i.e. If it sold $1 last year how much more did it sell this year.

    • Here we see NETFLIX grew at an good rate of 40 % in the revenue and the net profit figures grew by 60%.

3. The efficiency ratios of the company on Equity and Assets. i.e. How well is the company able to sweat each $1 that it puts to work in the company.

    • Here we see NETFLIX makes a Return on Assets of 6% and Return of Equity of 29% which is pretty good.

Here we see that NETFLIX scores high on each and every one of the parameters that we have selected when compared to our reasonable barriers that we have kept.

But the Debt/Equity ratio is high and can cause issues with respect to cashflows in case the interest rates increase. If you look at the Balance Sheet below closely you will see that they have $6.5 Billion in Long term debt when compared to Total Stockholders’ equity of only $4 Billion. They do have $2.6 Billion in Cash. With the massive pace at which the youth are veering towards watching movies/TV shows online from the comfort of the bean bag rather than dragging themselves out to the mall, it maybe a bet worth taking.

All things taken into account, NETFLIX maybe a risky bet but worth a look after you select all the Gold standard stocks in this site.

All these ratios can be found in the attached excel sheets and are based on the EDGAR report submitted by NETFLIX to the SEC. All the data on the above analysis can be found at the link below

Balance Sheet

 unnamed (2)

Income Statement

 unnamed (3)

Donate if you enjoyed the post.

Hi, It takes hours to scour through more than hundreds of companies to find good quality companies. If you like the post please do donate a dollar which would help motivate the effort to discover more companies. Thanks.


Leave a Reply